[Senate Hearing 115-736]
[From the U.S. Government Publishing Office]
S. Hrg. 115-736
REAUTHORIZING THE
HIGHER EDUCATION ACT:
ACCOUNTABILITY AND
RISK TO TAXPAYERS
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING REAUTHORIZING THE HIGHER EDUCATION ACT, FOCUSING ON
ACCOUNTABILITY AND RISK TO TAXPAYERS
__________
JANUARY 30, 2018
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
28-548 PDF WASHINGTON : 2020
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming PATTY MURRAY, Washington
RICHARD BURR, North Carolina BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah TIM KAINE, Virginia
PAT ROBERTS, Kansas MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska TINA SMITH, Minnesota
TIM SCOTT, South Carolina DOUG JONES, Alabama
David P. Cleary, Republican Staff Director
Lindsey Ward Seidman, Republican Deputy Staff Director
Evan Schatz, Democratic Staff Director
John Righter, Democratic Deputy Staff Director
C O N T E N T S
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STATEMENTS
TUESDAY, JANUARY 30, 2018
Page
Committee Members
Alexander, Hon. Lamar, Chairman, Committee on Health, Education,
Labor, and Pensions, Opening Statement......................... 1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State
of Washington, Opening Statement............................... 4
Witnesses
Carnevale, Anthony P., Ph.D., Research Professor and Director,
Georgetown University Center on Education and the Workforce,
Washington, DC................................................. 8
Prepared Statement........................................... 9
Summary Statement............................................ 12
Voight, Mamie, Vice President of Policy Research, Institute for
Higher Education Policy, Washington, DC........................ 13
Prepared Statement........................................... 15
Summary Statement............................................ 24
Cruz, Jose Luis, Ph.D., President, Herbert H. Lehman College,
City University of New York, Bronx, NY......................... 25
Prepared Statement........................................... 27
Summary Statement............................................ 33
Delisle, Jason D., Resident Fellow, American Enterprise
Institute, Washington, DC...................................... 34
Prepared Statement........................................... 35
Summary Statement............................................ 43
Miller, Ben, Senior Director, Postsecondary Education, Center for
American Progress, Washington, DC.............................. 43
Prepared Statement........................................... 45
Summary Statement............................................ 53
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.
Murray, Hon. Patty:
Senator Dick Durbin Statement for the Record................. 61
Kaine, Hon. Tim:
National organizations representing the Nation's military
servicemembers, veterans, survivors, and military families,
prepared statement......................................... 75
REAUTHORIZING THE
HIGHER EDUCATION ACT:
ACCOUNTABILITY AND
RISK TO TAXPAYERS
----------
Tuesday, January 30, 2018
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The Committee met, pursuant to notice, at 10:14 a.m., in
room 430, Dirksen Senate Office Building, Hon. Lamar Alexander,
Chairman of the Committee, presiding.
Present: Senators Alexander [presiding], Cassidy, Young,
Scott, Murray, Casey, Bennet, Baldwin, Murphy, Warren, Kaine,
Hassan, and Smith.
OPENING STATEMENT OF SENATOR ALEXANDER
The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will please come to order.
Please excuse my tardiness. I had gone to the Energy
Committee to try to provide a quorum for markups, and I
unsuccessfully--it didn't happen, so I left at 10 after. So
we'll proceed ahead; I'm sorry to hold people up.
This is another in a series of hearings as we work to reach
a result by early spring on reauthorizing the Higher Education
Act. Senator Murray and I will each have an opening statement,
then we'll introduce the witnesses. We thank each of you for
being here. After the witnesses' testimony, Senators will each
have 5 minutes of questions.
Before we begin, I want to express my concern about the
large number of senior positions in the Department of Education
that haven't been confirmed by the Senate even though this
Committee first approved their nominations in some cases as
long as three-and-a-half months ago.
For a while, the responsibility for this delay could be
shared with the Trump administration, which was slow to make
nominations, but not anymore.
The responsibility lies solely with the Democratic minority
which is insisting on taking most of 1 week to confirm each
nominee, knowing that there is not that much time for
nominations on the Senate floor.
So, 1 year after President Trump took office, only the
following four positions at the Department of Education have
been confirmed and are on the job: the Secretary; the Assistant
Secretary for Special Education; the Assistant Secretary for
Legislation; the Chief Financial Officer.
This Committee has approved four other senior nominees that
are awaiting a floor vote: the General Counsel, who was passed
out of Committee on October 18; the Assistant Secretary for
Civil Rights, out of Committee January 18; Jim Blew, Assistant
Secretary for Planning, Evaluation, and Policy Development, out
of Committee December 13; the Deputy Secretary, out of
Committee March 13.
Since everyone knows that the Senate majority will confirm
these four nominees, and the American people expect the
President to be able to have enough administrators in place to
be accountable for the Federal activities in 6,000 colleges and
100,000 public schools, my hope is that the minority will
quickly allow the Senate to approve these nominees.
This is not only happening at the Department of Education.
There are 103 nominations on the Executive Calendar awaiting
consideration by the Senate. This doesn't include judicial
nominations.
To put this in perspective, on November 21, 2013, when
Democrats thought the confirmation backlog was dire enough to
use the nuclear option to break the Senate rules, there were 76
nominations on the Executive Calendar, less than today.
Today we are looking at another important focus of our
reauthorization of higher education, accountability, whether
students are earning degrees worth their time and money.
An important part of that accountability is to find ways to
make sure students are not borrowing more than they will be
able to pay back.
Today, when students do not make payments on their loans,
colleges are held somewhat accountable under the current cohort
default rate measure.
I believe Congress should consider new accountability
measures that are more effective at holding all individual
programs at all colleges and universities accountable for the
ability of their students to pay back their loans.
There is a lot of discussion about Federal student loan
debt. While the amount spent on Federal aid each year is high--
about $120 billion, $28 billion in grants which don't have to
be paid back, and $92 billion in loans which do--the average
debt per undergraduate student is relativity low.
At one of our previous hearings, Dr. Susan Dynarski
testified: ``In the United States, typical undergraduate debt
is less than $10,000 for those who don't complete a 4-year
degree and about $30,000 for those who do. What's exceptional
about the United States is therefore not student borrowing but
a rigid, archaic repayment system that unnecessarily plunges
millions into financial distress.''
Historically, most student loans have been repaid and
taxpayers recover most of their money. However, there are
worrisome signs as we look ahead.
Here is what the student loan repayment picture looks like
today.
There are two groups of borrowers repaying student loans:
nearly half, 46 percent, who are repaying their student loans;
and a little more than half, 54 percent, who are in default or
are not making their payments on loans.
Of the more than half who are not repaying their student
loans, 21 percent are in default, 21 percent of all borrowers
in default, meaning they have not made a payment in over 9
months.
The current method of holding colleges accountable for
students making their loan payments is based on the cohort
default rate, the 21 percent of borrowers who are in default.
There are another 33 percent of all borrowers who are not
making their payments on time. These borrowers are not taken
into account in the current default rate measure. About two-
thirds of these borrowers are not making payments because of
economic hardship, and one out of three are at least 5 days
late on making a payment for a variety of reasons.
The taxpayer should be concerned not just about the 21
percent in default, but also about the 33 percent of borrowers
who are not making their payments on time.
The half who are making payments, nearly two-thirds of them
are in the income-based repayment program. The income-based
repayment program is a safety net for low-income borrowers
enacted by Congress in 2007. It sets a cap on monthly student
loan payments. If the loan is not repaid after 20 or 25 years
at this capped payment rate, the loan is forgiven.
Today, a portion of these borrowers, while considered in
good standing, have a student loan payment of zero because
their income is too low.
What was designed as a temporary safety net has become the
standard where students expect their debt to be forgiven after
a certain amount of time. This may be good for the student, but
it is not so good for the taxpayer.
We will not know the impact of so many borrowers being in
the income repayment program for another decade, when the first
set of borrowers begin to have their debt forgiven.
Since the last bipartisan reauthorization of the Higher
Education Act, the Federal Government has become the provider
of all loans for students. I didn't agree with that, but now
that the Federal Government is the bank, we must do what a bank
does, which is to protect its shareholders, and the
shareholders are the American taxpayers.
When a commercial bank makes a loan, it underwrites the
loan or checks the credit of the borrower to determine whether
the borrower is able to pay the loan back.
In the case of student loans, there is no underwriting, no
credit check. Students borrow roughly $100 billion each year in
individual loans that may go as high as $12,500 for an
undergraduate and as high as the cost of tuition for graduate
students.
As we have just discussed, students may pay their loan back
based on their income, and if they are not able to pay it all
back in 20 or 25 years, the loan may be forgiven.
I'm not ready to turn roughly $100 billion in loans into
grants, so we need effective ways to protect the taxpayer as
well as the student.
As we continue our work on reauthorizing the Higher
Education Act, I want to look at how we hold all schools--
public, private, and for-profit--accountable when students
borrow too much and are not prepared to pay those loans back.
One way to do that is to provide students with more data on
the cost of college and what their likely earnings would be in
the curriculum or program they choose.
Another way would be to remove barriers and encourage
schools to counsel students about the amount of money they can
afford to borrow.
Another is to look at ways to hold the schools themselves
more accountable.
There are several proposals by Members of this Committee,
other Members of Congress, and outside organizations that
reflect the interest in holding colleges and universities more
accountable for students repaying their loans.
One is a proposal from Senators Hatch and Shaheen. It
proposes fixing the cohort default rate system to instead look
at the percentage of students who fail to pay down at least $1
of their principal loan balance within 3 years.
The House Committee on Education took an approach similar
to Hatch-Shaheen which required college programs to have at
least 45 percent of borrowers in ``positive repayment status.''
Another proposal by the Hamilton Project suggests creating
a cohort repayment rate, not to be confused with cohort default
rate, to look at the percentage of Federal student loan dollars
that have been repaid in the 5-years after borrowers leave
school.
It would be possible to apply this at the program level as
well. Evaluating individual programs rather than applying a
blanket sanction to a college that has both excellent and
failing programs would help inform students' choices and spend
Federal dollars more responsibly.
Using student loan repayment rates in an appropriate way to
measure accountability for all programs at all of our 6,000
colleges and universities would be, in my view, a step in the
right direction.
To be clear, we want to ensure students are getting a
quality education and that they are not borrowing more than
they can afford to pay back to the taxpayers who are making the
loan.
This hearing and our continued conversations is one of our
five key areas we need to address in our reauthorization of the
Higher Education Act this spring. Just as we released white
papers in 2015 on accreditation, risk sharing and consumer
information, my staff plans to release a staff white paper
later this week intended to continue this thoughtful discussion
on what it entails to have a robust accountability system.
Senator Murray.
OPENING STATEMENT OF SENATOR MURRAY
Senator Murray. Thank you, Chairman Alexander.
One of the reasons you and I are able to work together to
tackle big, important issues like higher education is because
we work to find common ground and negotiate in good faith.
But our work is never over when the laws are passed. We
have to continue to work together, as you well know, to make
sure it is implemented as we intended.
I really just want to say at the top that I appreciate that
you listened to my concerns about the Department's
implementation of the Every Student Succeeds Act so far, and I
do look forward to hearing from Secretary DeVos. I really know
that you and I can work together to resolve the concerns with
implementation of our last bipartisan education law before we
begin negotiating on this one, so I appreciate it.
Now, I want to thank all of our witnesses for being here
today. I hope to hear from you how we can better hold all of
our colleges accountable for students' success in higher
education, and your thoughts will be very valuable to us as we
begin to negotiate the reauthorization of the Higher Education
Act.
I think by now it's very clear the issues in our higher
education system are deep-rooted and vast. Our caucus has very
clear priorities that need to be addressed if we are going to
reauthorize this law.
We have to look at all the challenges that students are
facing, including addressing the rising costs of college;
providing access to higher education to everyone who wants it;
ensuring students are able to learn in a safe environment free
from discrimination and harassment and assault; and as we will
discuss today, supporting students to help them complete their
education and be prepared for success after college. In short,
students should be better off, not worse off, after enrolling
in college.
It may be hard to get consensus across the aisle on these
issues, but I am really hopeful we can get there. And I think
it's really clear from the number of times accountability came
up in last week's hearing on access and innovation that these
issues intersect.
It is important that we reauthorize the Higher Education
Act in a way that addresses all of the issues comprehensively
and takes into account how they are related to each other.
Now I want to go into what accountability means and why
it's so important for students.
We ask our students to make enormous decisions about their
future--where to go to school, what kind of program best fits
their needs, and what to study.
But in order to make the best decisions, students need
better and more complete information to make the right choice
for them.
Because the Federal Government invests so heavily in higher
education, it is our job to hold all colleges receiving Federal
funding accountable when they are failing our students to make
sure that taxpayers are getting a good return on that
investment.
Students, too, deserve to know they are going to get a
return on their hard work and money and won't be saddled with
debt they can't repay.
I know there will be many ideas discussed today, but there
are three points I feel must be included in any conversations
about better accountability in higher education.
First, we cannot create a one-size-fits-all accountability
system for the more than 7,000 colleges in our entire higher
education system. Community colleges differ vastly from
traditional 4-year colleges, which differ from colleges that
exclusively provide instruction online. And in some cases,
schools may have different priorities, including for-profit
colleges, which is an industry with a troubling history of
sacrificing students? education for financial gain.
It is only logical we would design accountability measures
to take into account the different types of colleges and keep a
closer eye on bad actors.
Second, we need to hold schools accountable at all stages
of a student's education, not just whether or not they can find
a job after graduation.
I think we can all agree, one of the core missions of
higher education is to prepare students for the workforce, but
to get there colleges also need to be encouraging students to
complete college. Currently, a staggeringly low 55 percent of
students graduate within 6 years.
Accountability systems also need to ensure colleges play a
bigger role in making higher education more accessible and
supportive for underrepresented students.
By holding schools accountable for all phases of a
student's education, we can ensure colleges aren't avoiding
enrolling underrepresented students. We can't allow schools and
colleges to close the door on the students who have the most to
gain from higher education simply because they may face
additional challenges than their more advantaged peers.
Finally, our system of accountability also has to recognize
the incredible investment we are asking our students and
families to make, often in the form of debt.
Colleges that load students with debt that they can't
repay, or fail to prepare students to be successful in paying
down their debt, should not be able to benefit from taxpayer
dollars.
We have a crisis of borrowers falling further and further
behind on their debt, particularly students of color, and we
have to address the root causes.
When Chairman Alexander and I negotiated the Every Student
Succeeds Act, we agreed the previous education law was broken
but that we needed to maintain a focus on our most vulnerable
students and not allow them to fall through the cracks. And
since it is clear students' education very rarely ends with
high school these days, we need to maintain that same focus on
underserved students in our HEA reauthorization.
As I mentioned, only 55 percent of students are graduating
in a timely manner. Disappointingly, that already low number is
even lower for Latino, African American, and low-income
students.
Just as we clearly required in ESSA, we must ensure higher
education is paying attention to groups of students who have
previously struggled and using their success as a key factor in
our accountability system.
These are really broad issues, and I know many ideas will
be discussed today, but I want to make one thing clear: we
should be building a stronger accountability system. And all
the options discussed today should be in addition to, not in
replacement of, our current accountability measures.
We can't loosen guardrails and give colleges free range
just because they ask for it.
Instead, we need to use evidence to determine which
accountability measures produce good results for our students
and which guardrails need to be strengthened. Our students'
success should be our number-one priority.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Murray.
I'm pleased to welcome our witnesses.
The first witness is Dr. Anthony Carnevale, whom I've
quoted frequently in these hearings. He is Research Professor
and Director of the Georgetown University Center on Education
and the Workforce. He previously worked at the Educational
Testing Service, the Committee on Economic Development, the
Institute of Workplace Learning. He's held several positions
here on Capitol Hill. He's been appointed to various White
House commissions by three Presidents. He earned his Ph.D. in
Public Finance Economics at Syracuse University.
Ms. Mamie Voight is our second witness, Vice President of
Policy Research at the Institute for Higher Education Policy.
She leads that institute's projects on affordability and post-
secondary data policy. Her team currently manages a program
called the Post-Secondary Data Collaborative, which advocates
for using high-quality data to advance equity and student
success.
Our next witness is Dr. Jose Luis Cruz, President of Lehman
College in the City University of New York. He was Provost of
California State University-Fullerton, Vice President of Higher
Education Policy and Practice at the Education Trust, and Vice
President of Student Affairs for the University of Puerto Rico
system. He's testified before Congress, received his doctorate
from Georgia Tech.
Our fourth witness is Mr. Jason D. Delisle, Resident Fellow
at the American Enterprise Institute. His work focuses on
higher education financing, with an emphasis on student loans.
He was previously Director of the Federal Education Budget
Project at New America. He started his career on Capitol Hill
with Congressman Tom Petri and later was with the Senate Budget
Committee.
Our final witness is Mr. Ben Miller, Senior Director of
Post-Secondary Education at the Center for American Progress.
His work focuses on higher education accountability,
affordability, and financial aid, as well as for-profit
colleges and other issues. He was previously the Research
Director for Higher Education at New America and a Senior
Policy Advisor in the U.S. Department of Education.
I look forward to everyone's testimony. I thank you all for
being here.
We would ask you to summarize your comments in 5 minutes so
that we can have exchanges with the Senators, and we'll try to
keep the exchanges at about 5 minutes as well, so everyone has
a chance to participate.
Dr. Carnevale, let's begin with you. Welcome.
STATEMENT OF ANTHONY P. CARNEVALE, PH.D., RESEARCH PROFESSOR
AND DIRECTOR, GEORGETOWN UNIVERSITY CENTER ON EDUCATION AND THE
WORKFORCE, WASHINGTON, DC
Dr. Carnevale. Good morning, Chairman Alexander, Ranking
Member Murray, and distinguished Members of the Committee.
The short version of my testimony is that I think American
higher education is risky business, has been for a while, and
for students and taxpayers it's getting riskier all the time.
And I think what we need to do about that in a deliberate way
is to begin using information effectively to make markets in
higher education work better, initially with transparency and
with some considerable accountability to follow, in my
judgment.
The truth is we're already awash in data in higher
education, but we don't have the data we need, and we don't use
it effectively to help consumers or policymakers or taxpayers
figure out how to best invest in higher education for
themselves or their children.
I would argue that while there's lots of data it would be
nice to have, I think what we need most is data that connects
programs to jobs and careers. I think that's the priority given
the rising costs and the rising importance of post-secondary
education in our economy.
I would offer four or five reasons why I think we need to
act and need to act as soon as possible.
First, we have real performance problems in American higher
education. The Canadians spend 2.6 percent of their GDP on
higher ed. We spend 2.7 percent of our GDP on higher ed. They
get a 56 percent completion rate. We get a 46 percent
completion rate. Every year, 500,000 American high school
students graduate in the upper half of their class, but 8 years
later, as far as we can track them, they have not achieved
either a certificate, a 2-year degree, or a 4-year degree.
So this is not altogether about people being unprepared.
It's not about K-12 altogether. There is failure at the higher
education level as well.
The best summary evidence I have, I think, of our problem
is that the majority of Americans, barely a majority, 51
percent, in a Gallup poll tell us now that if they had it to do
over again they would change their degree, their program, their
institution, but they don't have it to do over again. So I
think the consumers are telling us something loud and clear.
Second, I would argue that we need program-level employment
and earnings outcomes because, truth be told, higher education
programs have become our biggest and most effective jobs
program. In America, it used to be in the 1970's that two out
of three workers had high school or less, and they were doing
fine. We know how they're doing now. They're very angry. The
economy has moved past them. Nowadays, two out of three workers
need some post-secondary education and training to get a job
that, at a minimum, pays $35,000 through their 30's, $45,000
after that, and averages $55,000 over a career. That is, I
think, a fair family wage, especially in a two-earner family,
where at least on the ground if you've got somebody at $55,000,
you've got another person at $40,000.
So I think we have to think of higher education as a jobs
program and as workforce development. That is new for higher
education. It didn't have to perform that function before. And
with the function comes new responsibilities.
I think that we also know that while economic value is not
the only reason people go to college, regularly the surveys say
about 70 percent, often more, say they go to college to have a
career, but in those same surveys, if you look deeper down
you'll find that 50 percent say they go to college to study
things that interest them, and you always get a number
somewhere around 30 percent who say I go to college so I can be
a better person.
Americans want a lot out of college. But the first thing
they want is a successful career, because in a capitalist
economy, if you can't get a job, you're not really a person. So
that's the priority for them as a matter of necessity. The
other stuff is nice, and I think should be made affordable for
them. But the job I think is the priority.
I think in the end, the third reason is that we've come to
the point that, in fact, we're already running a higher
education system that is a job training program. That is, in
the United States now, the market in higher education is more a
market in programs than it is in institutions. We're accustomed
to thinking of higher education as a market in institutions--do
I go to Georgetown, do I go to NYU, do I go to UVA? That's
really not the issue.
We now live in an economy where at every level--graduate,
BA, a 2-year degree, certificate--the ratio of earnings by
field of study at each of those levels exceeds 5-to-1. There's
an enormous difference now in the returns to different fields
of study. It's really a program-driven system from an economic
point of view, and it's a system where nowadays 40 percent of
people who get a Bachelor's degree earn more than the average
graduate degree, a good 30 percent of people who get 2-year
degrees earn more than the average BA because of the field of
study they're in. There are lots of certificates now,
especially technical certificates, that make more than a 2-year
degree or a 4-year degree. And in some cases, when you're
talking about social work and counseling, they earn more than
graduate degrees. A Master's in social work counseling and
early childhood education earns less, a lot less, than people
who get a certificate in heating ventilation and air
conditioning.
It is a system now where----
The Chairman. Dr. Carnevale, you're well over time.
Dr. Carnevale. Oh, sorry. So my point is that it's a system
that already operates in terms of a set of programs and not a
set of institutions, and accountability needs to recognize
that.
[The prepared statement of Dr. Carnevale follows:]
prepared statement of anthony p. carnevale
Good morning, Chairman Alexander, Ranking Member Murray, and
distinguished Members of the Committee. Thank you for the opportunity
to testify today about the return on investment in college programs.
The old rules of thumb--go to college, graduate, and get a job--are
no longer enough to navigate today's complex world. \1\ The
relationship between education after high school and jobs has become
much trickier to navigate. Learners and workers need a clear guidance
system that will help them make good decisions about college and career
that lead to fulfilling, purposeful lives while supporting their
families.
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\1\ Carnevale et al., Career Pathways, 2017. https://
cew.georgetown.edu/cew-reports/careerpathways/
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Today's economy is far more complex than those of decades past. We
have more occupations, programs of study, colleges and universities,
and students than ever before. Since 1950:
the number of occupations in the labor market has grown
from 270 to 840 \2\
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\2\ Ibid.
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the number of colleges and universities has grown from
1,800 to 4,700 \3\
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\3\ Ibid.
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the number of students enrolled in colleges and
universities has grown from 2 million to 20 million. \4\
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\4\ Ibid.
Meanwhile, since 1985, the number of postsecondary programs of
study has grown from 400 to 2,300. \5\
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\5\ Ibid.
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In recent years, the variety of postsecondary credentials--
including degrees, certificates, certifications, licenses, and badges
and other micro-credentials--has multiplied rapidly. New providers as
well as delivery modes and models, such as online and competency-based
education, have added further to the growing complexity and confusion.
This has translated into an explosion of choices and decisions that
make it hard for people to navigate through college and careers.
Colleges have become very expensive, with tuition and fees at
public 4-year colleges and universities growing 19 times faster than
the median family income since 1980. \6\ The trend toward state
disinvestment in postsecondary education for the past three decades has
shifted the financial burden to students and their families. \7\
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\6\ Georgetown University Center on Education and the Workforce
analysis of the College Board, Trends in College Pricing 2015, 2015,
Table 2A; U.S. Census Bureau and Bureau of Labor Statistics, Current
Population Survey, March Supplement, 1980, 2016.
\7\ State Higher Education Executive Officers, ``SHEF fiscal year
2016,'' 2017. http://sheeo.org/shef2016
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As prices have gone up, we've fallen from first to seventh in
postsecondary attainment among OECD nations. \8\ Our Canadian neighbors
now achieve a 56 percent college credential attainment rate by spending
2.6 percent of their GDP on higher education, while America achieves a
46 percent attainment rate by spending 2.7 percent of ours. \9\ At this
productivity rate, American higher education would have to spend as
much as $200 billion more per year to catch the Canadians--an amount we
simply can't afford. \10\
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\8\ OECD, Education at a Glance, 2017. http://www.oecd.org/edu/
education-at-a-glance-19991487.htm
\9\ Ibid.
\10\ Georgetown University Center on Education and the Workforce
analysis based on data from the U.S. Census Bureau, OECD, Federal
Reserve Bank of St. Louis, and National Center for Education and
Statistics surveys. A range of estimates using different methods
suggest a range between $120 billion and $240 billion.
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If students are investing more to go to college, they need to have
answers to basic questions about the value of postsecondary education.
They need better information to make decisions that have lifelong
economic consequences, and this information should be delivered in new
ways. In addition, the governance, accreditation, and financing of
postsecondary education must go beyond student completion as a goal and
be connected to measurable post-college outcomes.
While completion is an important metric for improving efficiency,
it ignores the relationship between learning and earning in particular
fields of study, as well as the social and economic value of general
education. If we don't change the way we think about providing
postsecondary education and training, we will continue to have a system
with runaway costs driven by institutional prestige rather than
learning and earning outcomes.
Today's ecosystem of postsecondary credentials is complex,
fragmented, and multilayered. This presents significant challenges to
learners, employers, and policymakers. We don't know enough about the
learning and competencies required to receive specific credentials. We
also don't know how various credentials across diverse fields are
valued, or how they interact with one another. Employers traditionally
have used specific credentials as signals of workers' competencies. But
today they are unable to assess the value of different credentials and
want to know how the competencies that underlie credentials match job
requirements. Without clear, comprehensive, and actionable information,
mediocrity prevails, and reputation rather than quality (captured by
earnings returns) is rewarded.
Measuring learning and earning at the program level is the key to
unbundling the value of postsecondary education options. Currently we
have ways to measure earning, but we are far away from being able to
measure learning. Why is measuring learning important? General
education competencies make workers more flexible and more adaptable to
changing technology, which is advantageous over the course of a career.
In the long term, we will need to figure out which combination of
general and specific competencies prepare workers better for
occupations. For now, the new relationship between postsecondary
programs and the economy comes with rules that require much more
detailed information about the connection between individual
postsecondary programs and career pathways:
RULE 1. On average, more education yields more pay.
Over a career, an average high school graduate earns $1.4 million;
an Associate's degree holder earns $1.8 million; a Bachelor's degree
holder earns $2.5 million; a Master's degree holder earns $2.9 million;
a PhD holder earns $3.5 million; and a professional degree holder earns
$4 million. \11\
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\11\ Carnevale et al., The College Payoff, 2011. https://
cew.georgetown.edu/cew-reports/the-college-payoff/
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RULE 2. What a person makes depends on what that person takes.
A major in early childhood education pays $3.4 million less over a
career than a major in petroleum engineering. \12\
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\12\ Carnevale et al., The Economic Value of College Majors, 2015.
https://cew.georgetown.edu/cew-reports/valueofcollegemajors/
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RULE 3. Sometimes less education is worth more.
Holders of IT certificates who work in field earn $70,000 per year
compared with $61,000 per year for the average bachelor's degree
holder. \13\ Thirty percent of associate's degree holders make more
than the average bachelor's degree holder. \14\
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\13\ Carnevale et al., Certificates, 2012. https://
cew.georgetown.edu/cew-reports/certificates/
\14\ Carnevale et al., The College Payoff, 2011. https://
cew.georgetown.edu/cew-reports/the-college-payoff/
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RULE 4. What a student studies matters more than where they study
it.
Over the past three decades, the college wage premium--how much
college graduates earn relative to high school graduates--has doubled,
\15\ but the variation in earnings by college major has grown even
more. \16\
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\15\ Carnevale et al., The Undereducated American, 2011. https://
cew.georgetown.edu/cew-reports/the-undereducated-american/
\16\ Carnevale et al., The Economic Value of College Majors, 2015.
https://cew.georgetown.edu/cew-reports/valueofcollegemajors/
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Measuring the Economic Value of Programs vs. Institutions
All of our research and that of our colleagues in the field
suggests that programs, not institutions, are the fundamental units
that transmit economic value to students. That is because it is a
student's major or field of study that has the strongest relationship
with the kind of career a student pursues after college. The variation
in earnings across college programs is far greater than the variation
in earnings across colleges.
In other words: What a student studies is more important than where
they study it.
That is why many workers with less education earn more than those
with more education. For example:
Bachelor's degree holders who majored in STEM, business,
or health fields earn more than graduate degree-holders who studied
education or social work.
Associate degree holders who studied engineering, IT, or
health earn more than bachelor's degree holders who majored in the arts
or English.
In terms of labor market outcomes, institutions matter, but
programs matter more.
Take the University of Texas system, for example. Graduates from
open-access UT System colleges who complete degrees in high-paying
majors can earn more than UT System graduates from selective colleges.
\17\ Architecture and engineering; computers, statistics, and
mathematics; and health majors at both middle-tier and open-access UT
System colleges earn more than those who major in physical sciences, or
humanities and liberal arts at selective UT System colleges. In fact,
graduates of open-access UT System colleges who majored in architecture
and engineering have median earnings greater than 61 percent of all
graduates from selective UT System colleges.
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\17\ Carnevale et al., Major Matters Most, 2017. https://
cew.georgetown.edu/wp-content/uploads/UT-System.pdf
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Why We Need Program-Level Earnings Data
The Federal Government has a compelling interest in measuring how
well the Nation's large investment in Title IV student aid pays off to
students and taxpayers. This can be done most effectively with program-
level data. While it is true that colleges provide immense and often
unmeasured social value, the economic value the programs provide can
and should be measured: the economic benefit associated with college is
the chief reason students pursue a college education and one of the
principal reasons taxpayers invest in higher education. Higher
education has the power to promote economic mobility and equity but
will ultimately fail to do so if higher education programs aren't
successfully preparing students for careers.
Currently, the Federal governance of higher education is based on a
primitive accountability structure, accreditation, that is demonstrably
flawed. This system has led to egregious outcomes and a waste of public
funds in the case of many for-profit colleges and many programs at
nonprofit providers as well. The basic flaw in the model that is used
by regional accreditors and other third-party entities is that the
system is designed to set standards and provide feedback to colleges,
not to measure outcomes and regulate the funding of programs.
Instead, we need to deliver usable consumer information at the
program level and to define outcomes-based standards to fund programs
based on their employment and earnings outcomes. Doing so would promote
efficiency and innovation in higher education by opening up the higher
education market to competition among different kinds of postsecondary
education and training providers. It would shift Federal governance
away from awarding funding based on the number of beakers colleges have
in a lab to awarding programs that lead to career and life success for
their students. And it will do this while maintaining institutional
autonomy.
That newly established consumer information should be made
available to postsecondary program providers so they can make informed
choices about their program offerings and performance.
Gathering good information is not enough, however. We need to get
that information into the hands of consumers in a user-friendly format
that aids their decisions. To accomplish that, we must (1) build
program-level information systems at a level of aggregation that
ensures individuals' privacy and (2) unleash the private sector to
transform that aggregated, open-source information into a user-friendly
format that aids the education and career decisions of prospective
college students and their families.
______
[summary statement of anthony p. carnevale]
American higher education is risky business for students and
taxpayers, and it's getting riskier. The cost of college has been
rising far faster than family incomes for decades. As prices have gone
up, we've fallen from first to seventh in postsecondary attainment
among OECD nations. Our Canadian neighbors now achieve a 56 percent
college credential attainment rate by spending 2.6 percent of their GDP
on higher education, while America achieves a 46 percent attainment
rate by spending 2.7 percent of ours. At this productivity rate for
American higher education, we would have to spend as much as $200
billion more per year to catch the Canadians--an amount we simply can't
afford. Not surprisingly, a Gallup/STRADA poll found that 51 percent of
college graduates would change their degree type, institution, or major
if they could do it.
Every year, more than 500,000 of our best students, those in the
top half of their high school class, give college a try but never earn
a degree or certificate. Even among those who get BAs, more than 20
percent end up in jobs that don't require college-level skills and pay
high school-level wages.
Our non-system of postsecondary education is a $530 billion black
box with no operating system. If we are to improve the return on
investment to higher education and reduce economic risk to consumers,
we need to increase transparency and performance standards at both the
institutional and program levels. We are already awash in institutional
performance metrics. What we need most is much more program level
transparency and accountability. Why?
First, program level data on employment and earnings outcomes is
urgently needed because higher education programs have become our
biggest and most effective jobs program. Increased economic value is
responsible for most of the phenomenal growth in postsecondary
enrollment since the 1980's and is the principle reason students
attend.
Second, college is becoming a market in programs as much, if not
more, than it is a market in institutions. We now live in an economy
where there is at least a 5:1 ratio between the highest and lowest paid
fields of study at every degree and certificate level. Because of
differences in field of study, 40 percent of BA holders earn more than
the average graduate degree holder, 30 percent of AA holders earn more
than the average BA holder, and many 1-year certificate holders earn
more than many AA and BA holders.
Third, the variety of postsecondary programs and credentials has
become too vast for consumers to navigate without help. Colleges and
other postsecondary providers are responding with a blizzard of
degrees, certificates, licenses, certifications, badges, and other
micro-credentials delivered through various media. No one really knows
what all these programs and awards mean. As a result, the postsecondary
education system has become a Tower of Babel resting on unsupported
claims.
Fourth, shifting transparency and accountability to the program
level will trigger longer term market-based reforms inside the black
box of institutional finances in higher education. Program-level
information would unbundle institutional spending, tighten the
connection between learning and earning, encourage competition among
program providers, and foster specialization. These dynamic market
forces are moving us away from the current cafeteria system in which
every college has to offer every program to be competitive.
Accreditation based on economic outcomes can rejuvenate current
practices gone stale. Finally, program-level information on employment
and earnings, aggregated and made available to the public, would
encourage competition among providers to develop counseling tools for
institutions and families.
______
The Chairman. Thank you. We'll look forward to continuing
the conversation.
Ms. Voight, welcome.
STATEMENT OF MAMIE VOIGHT, VICE PRESIDENT OF POLICY RESEARCH,
INSTITUTE FOR HIGHER EDUCATION POLICY, WASHINGTON, DC
Ms. Voight. Thank you, Chairman Alexander, Ranking Member
Murray, and Members of the Committee.
My name is Mamie Voight, and I am Vice President of Policy
Research at the Institute for Higher Education Policy, or IHEP,
a non-profit, non-partisan organization that promotes college
access and success, particularly for underserved students.
IHEP also leads the Post-Secondary Data Collaborative, a
non-partisan coalition of organizations representing students,
institutions, states, employers, and privacy and security
experts. Together, we seek to advance the use of high-quality
data to improve student success and educational equity.
The research is clear: college investments pay off for
students and for our country. Graduates earn more, pay more in
taxes, and are healthier. College is a pathway out of poverty,
with low-income students five times more likely to climb the
economic ladder if they earn a degree.
Yet where a student goes to college ultimately shapes her
ability to climb that ladder. Research shows time and again
that outcomes vary dramatically across institutions and
programs, even those enrolling very similar students.
For our most vulnerable students with the most to gain from
college and the most to lose if things go wrong, the stakes are
high. And for taxpayers counting on Federal policymakers to
responsibly steward their $157 billion higher education
investment, the stakes are equally as daunting. Students and
taxpayers should expect some degree of accountability to manage
this risk.
Instead, students, policymakers, and institutions cannot
answer critical questions about which programs at which
institutions provide an adequate return on investment, and for
which students. Any accountability system, whether it be
market-based, incentive structures, or other systems, must be
grounded in reliable evidence.
This need for evidence holds regardless of who or what is
driving the accountability system--student choice, the Federal
Government, state governments, or accreditors. Yet both
students and policymakers must make decisions with incomplete
information.
Imagine buying a car without knowing its fuel economy or
safety rating, or purchasing a home without knowing critical
details revealed in the inspection. Now imagine assisting a
loved one trying to decide between two colleges. She asks
questions like: Do part-time black students graduate? What
types of schools do students transfer to? And how do graduates
fare in the workforce? Your loved one won't be able to answer
those questions because the available data are incomplete. And
right now, even as stewards of $157 billion in Federal
investments, neither can you.
Federal policy is what stands in the way of answering these
questions, even though the data to answer them already exist.
Our data infrastructure is duplicative, inefficient, and
excludes many students. Institutions and states have recognized
this insufficiency of Federal data and tried to plug the holes
themselves. But piecemeal, voluntary reporting isn't enough.
In a state like Virginia, many residents would be missing
in state-based employment data just because they work for the
Federal Government, they are members of the military, or they
work across state lines in Maryland or D.C.
Recent Federal attempts to measure workforce outcomes are
insufficient too, because they omit the 30 percent of students
who do not receive Federal financial aid. By not counting all
students, these metrics produce incomplete results, ignore non-
aided students' needs, and stymie efforts to evaluate equity. A
better, more complete solution exists.
A secure, privacy-protected, post-secondary student-level
data network like the one proposed in the bipartisan College
Transparency Act would integrate existing Federal, state, and
institutional data sources into a more coherent, nimble,
secure, and privacy-protected network. It would leverage
existing systems to create better information that counts all
students, while reducing reporting burden on institutions.
More than 130 organizations representing students,
colleges, veterans and employers have endorsed the College
Transparency Act, recognizing that it would create a more
functional post-secondary marketplace and empower actors across
the system.
The Federal Government is uniquely positioned to compile
better post-secondary information. It is the only entity with
comprehensive workforce data, including for students who cross
state lines, and the only entity that can collect consistent,
comparable data from colleges across the country.
Good policy and good decisions are grounded in good
evidence, transparency, and accountability. As you work to
reauthorize HEA, consider the questions you want to ask but
cannot answer. Consider your role in protecting students and
taxpayers, and consider the student whose college choice will
define her future.
Please safeguard taxpayer investment, help students climb
the economic ladder, and secure their future.
Thank you.
[The prepared statement of Ms. Voight follows:]
prepared statement of mamie voight
Chairman Alexander, Ranking Member Murray and Members of the
Committee, thank you for the opportunity to testify today.
My name is Mamie Voight, and I am Vice President for Policy
Research at the Institute for Higher Education Policy (IHEP), a
nonprofit, nonpartisan, research, policy, and advocacy organization
working to promote college access, success, and affordability,
particularly for students who are underserved by our postsecondary
system--including low-income students and students of color.
The research is abundantly clear: investing in a college education
pays off. \2\ But while college is often a worthwhile investment,
students, policymakers, and institutions cannot answer crucial
questions about which programs at which institutions provide an
adequate return on this investment, and for which students. This
failure to answer key questions hampers policymaker efforts to design
and implement accountability systems that manage the risk to taxpayers
and students.
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\2\ Ma, J., Pender, M., & Welch, M. (2016). Education Pays 2016.
The College Board. Retrieved from https://trends.collegeboard.org/
sites/default/files/education-pays-2016-full-report.pdf
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Those risks are real, especially for the most vulnerable students
with the most to gain from a higher education, but also the most to
lose if things go wrong. College is a pathway out of poverty, with low-
income students five times more likely to climb the economic ladder if
they earn a college degree than if they don't. \3\t, where a student
goes to college ultimately shapes her opportunity to climb those rungs.
Outcomes vary dramatically across institutions and programs--even those
enrolling similar types of students. Quality data about postsecondary
outcomes are necessary to illuminate those patterns in ways that can
inform policymaker efforts to protect taxpayer dollars.
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\3\ Urahn, S. K., & Plunkett, T. (2013). Moving on up: Why do some
Americans leave the bottom of the economic ladder, but not others?
(Issue Brief). Retrieved from The Pew Charitable Trusts website:http://
www.pewtrusts.org/en/research-and-analysis/reports/0001/01/01/moving-
on-up
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At IHEP, we recognize that the use of high-quality data is
necessary to drive improvements in student outcomes and educational
equity, which is why we lead the Postsecondary Data Collaborative
(PostsecData). PostsecData brings together dozens of organizations
committed to the use of high-quality data to improve student success
and close equity gaps. Working with these partners, which represent
students, institutions, states, employers, and privacy and security
experts, we conduct research, identify potential policy solutions, and
advocate for higher quality data, all in the interest of better serving
students. Grounded in a commitment to equity and better outcomes, more
than 130 organizations recommend integrating existing Federal, state,
and institutional data sources into a more coherent, nimble, secure,
and privacy-protected student-level data network to create more usable
information to inform decisionmaking.
Patterns of evidence: Our current higher education system
Data build patterns of evidence that can and should shape
policymaking. The data we have now paint a troubling picture about
student outcomes, especially for low-income students and students of
color. While more students from all walks of life are going to college
today, enormous gaps still separate black, brown, and low-income
students from their peers. In fact, low-income students today go to
college at the same rate that high-income students did four decades
ago. \4\ And among first-time, full-time students at 4-year colleges,
only 40 percent of Blacks, 54 percent of Hispanics, and 41 percent of
American Indians graduate within 6 years, compared with 63 percent of
Whites. \5\ All told, White young adults are about twice as likely as
Black or Hispanic young adults to have attained a bachelor's degree,
and high-income young people are six times more likely than those from
low-income backgrounds to have had earned a BA. \6\
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\4\ U.S. Department of Education (2010). The condition of
education (pp. 208, 210). Retrieved from: https://nces.ed.gov/
pubsearch/pubsinfo.asp'pubid=2010028; U.S. Department of Education
(2017), The condition of education (pp. 234-235). Retrieved from:
https://nces.ed.gov/pubsearch/pubsinfo.asp'pubid=2017144
\5\ U.S. Department of Education (2017). Graduation rates for
selected cohorts, 2007-12; Outcome measures for cohort year 2007;
Student financial aid, academic year 2014-15; and Admissions in
postsecondary institutions, fall 2015: First look (provisional data).
Retrieved from: https://nces.ed.gov/pubsearch/
pubsinfo.asp'pubid=2017084
\6\ U.S. Department of Education (2017). The condition of
education (p. 45). Retrieved from: https://nces.ed.gov/pubsearch/
pubsinfo.asp'pubid=2017144; Bailey, M.J. & Dynarski, S.M. (2011). Gains
and gaps: Changing inequality in U.S. college entry and completion,
National Bureau of Economic Research (4, 26). Authors' calculations
using 1997 National Longitudinal Survey of Youth. Retrieved from:http:/
/www.nber.org/papers/w17633
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Let's be clear: these gaps are not predetermined by demographics.
Yes, because our system concentrates low-income students and students
of color in K12 schools where we invest less and offer them less access
to rigorous courses, some students come to college with less academic
preparation. \7\t, academic preparation is far from the entire story,
and data show us that. High-income students with low math scores attain
a bachelor's degree at the same rate as low-income students with high
math scores. \8\ other words, immense talent that could help fill
workforce needs and build a stronger society is left untapped by an
education system that leaves too many low-income students behind--
despite their academic strengths.
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\7\ Ushomirsky, N. & Williams, D. (2015). Funding gaps 2015.
Retrieved from: https://edtrust.org/resource/funding-gaps-2015/; Chen,
X., Wu, J., & Tasoff, S. (2010). Academic preparation for college in
the high school senior class of 2003-04, Table 2 and Table 4 (Issue
Tables No. NCES 2010-169). p. 6 and 10. Retrieved: http://nces.ed.gov/
pubs2010/2010169.pdf
\8\ U.S. Department of Education (2005). Youth Indicators 2005
(Table 21, p. 50).
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The patterns illuminated by the data make clear that what
institutions do matters immensely for students, especially low-income
students and students of color. Study after study finds that similar
institutions enrolling similar students produce very different results
for those students. \9\ke Georgia State University(GSU) and Kennesaw
State University (KSU), for example. The SAT scores of entering
students are about the same at both of these public colleges in
Georgia, yet Georgia State enrolls higher proportions of low-income
students (57 percent at GSU vs. 36 percent at KSU) and students of
color (48 percent at GSU and 25 percent at KSU). Yet, graduation rates
at Georgia State are 10 percentage points higher than at Kennesaw State
(53 percent vs. 42 percent). \10\orgia State's efforts to use data to
increase student success are discussed later in this testimony.
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\9\ Yeado, J. (2013), Intentionally successful: Improving minority
student college graduation rates. Retrieved from: https://edtrust.org/
resource/intentionally successful-improving-minority-student-college-
graduation-rates/;Yeado, J., Haycock, K., Johnstone, R., & Chaplot, P.
(2014). Higher education practice guide: Learning from high--performing
and fast-gaining institutions. Retrieved from: https://edtrust.org/
resource/education-trust-higher-education-practice-guide-learning-from-
high-performing-and-fast-gaining-institutions/; The Upshot (2015). Top
colleges doing the most for low-income students. Retrieved from:
https://www.nytimes.com/interactive/2015/09/17/upshot/top-colleges-
doing-the-most-for-low-income-students.html; Hiler, T., Erickson
Hatalsky, L., & John, M. (2016). Incomplete: The quality crisis at
America's private, non-profit colleges. Retrieved from: http://
www.thirdway.org/report/incomplete-the-quality-crisis-at-americas-
private-non-profit-colleges; Nichols, A. & Evans-Bell, D. (2017). A
look at black student success: Identifying top-and bottom-performing
institutions. Retrieved from: https://edtrust.org/resource/black-
student-success/; Nichols, A. (2017). A look at Latino student success:
Identifying top-and bottom-performing institutions. Retrieved from:
https://edtrust.org/resource/look-latino-student-success/
\10\ Data from College Results Online, www.collegeresults.org
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Demography most certainly is not destiny. Indeed, at the average 4-
year institution with an above-average share of Pell students, the
graduation rate for Pell students is 39 percent. However, we know there
are schools serving an even larger share of Pell students that have
graduation rates that far surpass that bar, such as Spelman College (72
Pell graduation rate) and Berea College (61 percent Pell graduation
rate). \11\
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\11\ Third Way analysis of IPEDS data, 2018.
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Clearly what colleges do makes a difference for students. These
variations in outcomes are exactly why we need quality evidence to
inform student choice, protect taxpayer investments, facilitate
institutional improvement, and close equity gaps.
Accountability must be grounded in evidence
Any accountability system--whether it be market-based
accountability, bright-line indicators, incentive structures, or other
systems--must be grounded in reliable evidence. This need for evidence
holds regardless of who or what is driving the accountability system:
student choice, the Federal Government, state governments, or
accreditors. Indeed, Ranking Member Murray (D-WA) and Speaker Ryan (R-
WI) have reinforced a bipartisan commitment to data-driven policymaking
by launching the Commission on Evidence-Based Policymaking. This effort
brought together experts from both sides of the aisle ``to develop a
strategy for increasing the availability and use of data in order to
build evidence about government programs, while protecting privacy and
confidentiality.'' \12\is commitment to evidence is key to designing
and implementing good policies, especially within higher education,
where data too often are incomplete or insufficient.
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\12\ Commission on Evidence-Based Policymaking, https://
www.cep.gov/
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Much of our existing data are insufficient for students, policymakers,
and institutions
While some postsecondary data, such as information on the student
loan program, are relatively complete, of high-quality, and ready to be
used to improve accountability systems now, much of our data on student
outcomes are insufficient. Through our work with the PostsecData
Collaborative we know that our current postsecondary data
infrastructure is a disjointed puzzle that needs to be improved. While
our system is data rich, we are information poor. Institutions report
data to multiple entities--states, accreditors, voluntary data
initiatives, and various places within the Federal Government,
including the Integrated Postsecondary Education Data System (IPEDS)
and the National Student Loan Data System (NSLDS). In most cases, these
various data systems do not talk with each other, and in some cases
institutions are reporting very similar data to multiple places, piling
on reporting and compliance burden that inhibits their capacity to use
the data. In other instances, institutions must report data to the
Department of Education that another Federal agency already holds, such
as data on the receipt of veteran's education benefits.
The current system falls short of answering critical questions
about college enrollment, completion, costs, and outcomes, and many
existing data collections fail to capture the diversity of students
pursuing college today. To illustrate the lack of data available today,
consider this:
Ava is an African-American working mother of two and hopes to
enroll at a local college part-time to learn a new skill. As Ava
considers the postsecondary options in her community, she seeks answers
to the following questions about each college:
How do students fare in the workforce after leaving
college?
How much do students borrow, and can they successfully
repay their loans?
How many part-time African-American students graduate
from colleges near me?
How long does it take students to complete their degrees
or certificates?
What about the students who do not complete at community
colleges? Do they transfer to a four--year school to complete their
studies?
Like all prospective students, Ava should be able to answer each
before deciding where she will enroll. But existing policies prevent us
from answering many of these basic questions.
Furthermore, policymakers--at the Federal, state, accreditor, and
institution level--also need answers to these questions to responsibly
steward taxpayer funds and spur institutional improvement. Each year we
invest billions of taxpayer dollars in our Nation's postsecondary
education system. And targeted student aid helps millions of hard-
working students make the promise of a college education an attainable
reality. Yet policymakers lack valuable information about which
institutions provide an adequate return on investment for which
students, making it difficult to enact policies to drive institutional
improvement. That needs to change.
Additionally, our Nation's college leaders seek to provide
educational offerings that meet the needs of their students and
position them for success. But many lack comprehensive information
about how their students fare after leaving their institution--either
for subsequent education or for employment. A strong postsecondary data
infrastructure will help college leaders develop and implement targeted
strategies aimed at supporting student success.
Indeed, college leaders often cite data-use as a driving factor in
helping them better serve students, and Federal policy should be
responsive to these institutional needs. \13\ A more efficient and
streamlined reporting system will reduce the current data-reporting
requirements as well as the financial and human resources necessary to
complete current requirements. Alleviating this burden, we hope, will
allow institutions more time and resources to use the data to improve
student outcomes.
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\13\ Rorison, J. & Voight, M. (2016). Leading with data: How
senior institution and system leaders use postsecondary data to promote
student success. Institute for Higher Education Policy. Retrieved from
http://www.ihep.org/sites/default/files/uploads/postsecdata/docs/
resources/ihep--leading--with--data----final.pdf; Using data to
increase student success (case studies). Association of Public & Land-
grant Universities. Retrieved from http://www.aplu.org/projects-and-
initiatives/accountability-and-transparency/using-data-to-increase-
student-success/index.html
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For example, some institutions have made marked gains in
persistence and completion for students of color and low-income
students by focusing deliberately on their data. They use data in two
notable ways: (1) to create early alert systems that allow faculty or
staff to quickly identify and intervene with students who show signs of
being at risk of dropping out and (2) to evaluate trends by race/
ethnicity and income to uncover systemic inequities and barriers to
student success.
Institutions like Georgia State and Temple University have
conducted robust data analyses to identify indicators that show
students are falling off track toward graduation. Georgia State has
incorporated these indicators into early alert systems, so faculty or
staff can reach out if a student exhibits a red flag behavior, such as
registering for the wrong class, getting a ``C'' in the first class in
their major, or not registering at all. \14\mple has used their data to
inform advisors about which students are at-risk for what reasons, so
advisors have the information they need to serve students well. \15\
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\14\ Collins, S. (2016). Big dreams, big data. Georgia State
University Magazine. Retrieved from: http://news.gsu.edu/2017/11/15/
big-dreams-data/
\15\ Ajinkya, J. & Moreland, M. (2015). Driving toward greater
postsecondary attainment using data, Chapter 4: How to use student-
level data to improve postsecondary student outcomes. Retrieved from:
http://guidebook.ihep.org/data/chapter/four/
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To spur systemic change, though, institutions also must evaluate
trends in their data. Take Florida State University (FSU), for example.
Leadership at FSU developed attrition charts that identified patterns
in attrition rates for students of different demographics. They found
that while white, non-Pell recipients followed the trends many expect--
those who drop out do so in the first year--other student groups
followed very different patterns. \16\ Some low-income Latina students,
for instance, were dropping out later in their college careers, even
though they were in good academic standing. Administrators investigated
the trend further and found that many Latina students had family
obligations far from campus, and those commitments were making it
difficult to complete their studies. To alleviate this challenge, the
university implemented a bus service to run from Tallahassee to Miami
every Friday, returning to campus on Sunday night so students could
manage family commitments and get back to class. Data uncovered a trend
that enabled administrators to enact an equity-centric solution.
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\16\ Engle, J. (2012). Replenishing opportunity in America: The
2012 midterm report of public higher education systems in the Access to
Success initiative, Florida State University. Retrieved from: http://
edtrust.org/wp-content/uploads/2013/10/2012--A2S--Case--Study--
Florida--FINAL.pdf
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Building strong Federal data systems that compile the data needed
at the national level will alleviate compliance burdens on
institutions, allowing more of them to undertake these types of robust
analyses at the campus level, analyses that can have immediate impacts
on students' lives. Institutions have the power to use detailed data to
remove barriers for students, and better designed Federal data networks
can free up institutional capacity to do just that.
The problem: Our current postsecondary data infrastructure
The current puzzle that is our postsecondary data infrastructure is
duplicative, inefficient, cumbersome, and worst of all--it does not
allow key constituents to answer pressing questions about today's
higher education system. Composed of IPEDS, multiple data systems
within the Office of Federal Student Aid, state longitudinal data
systems, private data collections, workforce data held by multiple
Federal and state agencies, and more, the system is a complex maze
riddled with holes.
For instance, IPEDS serves as the primary public tool for
collecting and reporting data on higher education. However, IPEDS is an
aggregate data collection, meaning more than 7,000 institutions must
use student-level data to calculate and report individual metrics.
Making a change to IPEDS requires defining a new metric, providing
detailed reporting instructions to institutions, and then each of those
7,000 plus institutions must calculate and report the new metric. As a
result, changes are slow, and many students remain missing or invisible
in IPEDS metrics. For example, the graduation rates in IPEDS only
measure the percentage of first-time, full-time students who complete
their degree or credential at their first institution within 6 years.
It leaves out part-time students, transfer-in students, and does not
count outward transfer as an outcome--a particular problem for
community colleges. As a result, these first-time, full-time graduation
rates that are so often relied upon only reflect about half (47
percent) of today's entering students. \17\
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\17\ IHEP analysis of IPEDS 2015 data.
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New Outcome Measures in IPEDS help remedy this problem by
collecting completion information for part-time and transfer students,
but they are not disaggregated by race/ethnicity, making it impossible
to evaluate questions of equity. Also, while these measures count
outward transfers, they do not report the type of institution a student
transferred to. As a result, community college students still do not
know their chance of transferring from a community college to a 4-year
program, nor do they have any information about their chance of
completing a degree after transfer. \18\
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\18\ Institute for Higher Education Policy (2017). An evolution of
measuring student outcomes in IPEDS. Retrieved from: http://
www.ihep.org/postsecdata/data-at-work/new-postsecdata-explainer-
student-outcome-metrics-ipeds
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Compared with IPEDS, student-level data reporting is less
burdensome and more adaptable to a changing higher education landscape.
The Office of Federal Student Aid at the Department of Education (ED)
collects student-level data on students who receive Title IV financial
aid, and ED has used those data to answer questions about student debt,
loan repayment, and earnings. \19\ Because ED had student-level data,
the agency was able to explore metric definitions and make informed
decisions about data quality and appropriate specifications for public
reporting. Also, those data on aided students were matched to earnings
information held by the Department of Treasury (Treasury). This data
match is promising, yet incomplete. Because it is based only on FSA
data, it leaves out non-aided students, an issue that is discussed in
greater detail below.
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\19\ Executive Office of the President of the United States.
(2015). Using Federal data to measure and improve the performance of
U.S. institutions of higher education. Retrieved from https://
collegescorecard.ed.gov/assets/
UsingFederalDataToMeasureAndImprovePerformance.pdf; Miller, B. (2016).
Building a student-level data system. Institute for Higher Education
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/building--a--student-level--data--system.pdf
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The aggregate IPEDS reporting and the incomplete linkages between
ED and Treasury offer just two examples of the cumbersome, inefficient,
and incomplete data systems that compose our national postsecondary
data infrastructure. Because of these inefficiencies, efforts to drive
informed decisionmaking are stalled. So how can Federal policymaking
help fix these problems, answer key questions about higher education,
and make the puzzle pieces fit? By identifying the data to collect and
designing an infrastructure to collect them.
Metrics: What data to collect?
First, policymakers must determine what should be measured.
Equitable access and success in higher education relies on information
that reflects the higher education experience of all students at all
institutions, yet many of today's students are missing or invisible in
current data systems. For example, data on graduation rates
historically have been limited to first-time, full-time students, data
on employment outcomes are limited either to Federal aid recipients or
students who do not cross state boundaries, and cost, financial aid,
and outcome metrics are not always disaggregated by race/ethnicity or
socioeconomic status.
Without more consistent metrics, progress toward equity and success
for all students is quite simply stagnated--prospective students and
policymakers will continue to be forced to make key decisions without
sufficient information. To advance the goals of social mobility and
equity, we need a key set of comprehensive and comparable metrics that
answer these critical questions about who attends college, who succeeds
in and after college, and how college is financed. Specifically, the
answers must provide information on how underserved students fare.
Over the past decade institutions and states have recognized the
need for better data. As a result, many created and joined voluntary
data initiatives to collect better information to inform institutional
improvement, consumer information, and policymaking efforts. At IHEP,
we reviewed the details of these initiatives and found a great deal of
agreement about what is important to measure. In Toward Convergence: A
Technical Guide for the Metrics Framework, we categorize and define a
set of about 30 metrics and 10 disaggregates that states and
institutions find important in measuring college access, progression,
completion, cost, and outcomes (see Table 1).
These metrics measure performance, efficiency, and equity, and are
designed to offer insights to institutions to help them improve. Some
of these metrics are not collected at the Federal level at all, and
some, such as enrollment or graduation rates, are collected already at
the Federal level in ways that fail to include all students. The
proposed definitions underlying the Framework in Table 1 are intended
to refine metrics to count all students, all institutions, and all
outcomes. Given the field's convergence on these metrics, they should
be incorporated into government data systems, filling information gaps
and answering unanswered questions about student success and equity.
Table 1: A Field-Driven Metrics Framework
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Any accountability systems--whether market-driven, government-
designed, or accreditor-led--should rely on quality metrics, such as
the ones in Table 1. When designing accountability systems,
policymakers should select metrics that align with ultimate policy
objectives, model the impacts of proposed policies before legislating,
and anticipate and protect against unintended consequences.
Consider, for instance, discussions about the use of cohort default
rates (CDRs) or repayment rates (RRs) in Federal accountability.
Neither metrics is wholly ``better'' than the other. Rather, each
metric measures something different and has its own strengths and
limitations.
CDRs are a short-term measure of default. They give
policymakers and institutional leaders a critical look at students'
risk of bearing the most damaging outcome of taking on student debt:
default. By virtue of what they measure, CDRs incent institutions to
keep a watchful eye on vulnerable students at risk of this life-
altering outcome. However, CDRs have limitations. They only measure
default within a 3-year window, with the latest data showing that about
12 percent of students default on their Federal loans within 3 years.
\20\ Recent research, however, projects that nearly 40 percent of
students may default within a 20-year window. \21\ Furthermore,
institutions can influence CDRs by encouraging borrowers to enter
deferment or forbearance to delay default, even if those options are
not in students' best interest. These limitations are real, should be
understood, and where possible steps should be taken to mitigate them.
However, they do not negate the value of the measure itself. \22\
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\20\ U.S. Department of Education (2014). FY2014 Official Cohort
Default Rate Briefing. Retrieved from: https://ifap.ed.gov/
eannouncements/attachments/FY2014OfficialCDRBriefing.pdf
\21\ Scott-Clayton, J. (2018). The looming student loan default
crisis is worse than we thought. Retrieved from: https://
www.brookings.edu/research/the-looming-student-loan-default-crisis-is-
worse-than-we-thought/
\22\ Janice, A. & Voight, M. (2016). Making sense of student loan
outcomes: How using repayment rates can improve student success.
Retrieved from: http://www.ihep.org/research/publications/making-sense-
student-loan-outcomes-how-using-repayment-rates-can-improve
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RRs measure borrower progress in repaying their Federal
loans and have been proposed as a replacement to CDRs. RRs are a
valuable metric that provide a more nuanced understanding of borrower
success in retiring debt because they capture as negative outcomes
borrowers who are avoiding default, but not making progress in paying
down loan principal. In this sense, repayment rates focus policymaker
and institutional attention on struggling borrowers who are not seeing
the desired return on their educational investment, even though their
situation may not be quite as dire as those facing default. \23\
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\23\ Janice, A. & Voight, M. (2016). Making sense of student loan
outcomes: How using repayment rates can improve student success.
Retrieved from: http://www.ihep.org/research/publications/making-sense-
student-loan-outcomes-how-using-repayment-rates-can-improve
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Both of these metrics are valuable at measuring different things,
and each focuses decisionmakers' attention in different ways, so they
should not be pitted against each other as an either/or choice. Indeed,
this example shows how multiple high-quality measures can work in
concert with each other to inform complex decisionmaking for students,
policymakers, and institutions.
The solution: Fixing our postsecondary data infrastructure
The voluntary initiatives, like Complete College America and
Achieving the Dream, mentioned above have illuminated data gaps and
proven that it is possible to collect better data. However, they do not
serve as a replacement for data collection at the Federal and state
levels. By their nature, these initiatives are voluntary, so they do
not include information on all institutions. When faced with life-
altering, expensive college decisions, students should not have to rely
upon voluntary reporting or search through more than a dozen
initiatives to find the information they need. Furthermore, it is
burdensome for institutions to participate in multiple voluntary
initiatives. We must learn from these initiatives and use their
experiences to implement a more permanent and effective policy
solution.
As evidenced by the voluntary initiatives, the inability to answer
critical questions and collect the metrics outlined above comes not
from a lack of data, but rather from policy barriers that prevent
existing postsecondary data systems from being linked. Integrating
existing Federal, state, and institutional data sources into a more
coherent, nimble, secure, and privacy-protected network would create
more usable information that could help students navigate the complex
higher education marketplace. This type of network also is crucial to
produce the information necessary to evaluate and meet workforce
demands, to identify and close equity gaps in our postsecondary system,
and to inform policy design.
Agreement is growing around the best way to modernize our Nation's
postsecondary data infrastructure. Through the Postsecondary Data
Collaborative, IHEP engaged with organizations representing
institutions, states, students, employers, and privacy and security
experts to explore options for improving our Nation's postsecondary
data infrastructure. \24\ This research found that the best approach to
producing the information necessary to answer students' questions is to
develop a secure, privacy-protected postsecondary student-level data
network. \25\ In fact, members of both the Senate and the House have
introduced the bipartisan College Transparency Act to create such a
network housed at the National Center for Education Statistics (NCES).
\26\ More than 130 organizations, representing students, institutions,
veterans, college access providers, and employers, have publicly
endorsed the College Transparency Act out of a recognition that this
system would create a more functional postsecondary marketplace that
serves all students. \27\ This type of system would:
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\24\ Institute for Higher Education Policy. (2015). Envisioning
the National Postsecondary Data Infrastructure in the 21st Century
(paper series). Retrieved from http://www.ihep.org/postsecdata/mapping-
data-landscape/national-postsecondary-data-infrastructure
\25\ Rorison, J. & Voight, M. (2015). Weighing the options for
improving the national postsecondary data infrastructure. Institute for
Higher Education Policy. Retrieved from http://www.ihep.org/sites/
default/files/uploads/docs/pubs/weighing--the--options--for--
improving--the--national--p ostsecondary--data--infrastructure----
september--2015.pdf
\26\ Student Right to Know Before You Go Act, S.1195, 114th
Congress (2015). Retrieved from https://www.Congress.gov/bill/114th-
congress/senate-bill/1195; Student Right to Know Before You Go Act,
H.R.2518, 114th Congress (2015). Retrieved from https://
www.Congress.gov/bill/114th-congress/house-bill/2518; College
Transparency Act, S.1121, 115th Congress (2017). Retrieved from https:/
/www.Congress.gov/bill/115th-congress/senate-bill/1121; College
Transparency Act, H.R.2434, 115th Congress (2017). Retrieved from
https://www.Congress.gov/bill/115th-congress/house-bill/2434
\27\ Postsecondary Data Collaborative (2017). Postsecondary Data
Collaborative and Workforce Data Quality Campaign applaud bipartisan,
bicameral College Transparency Act. Retrieved from: http://
www.ihep.org/press/opinions-and-statements/postsecondary-data-
collaborative-and-workforce-data-quality-campaign
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Empower all students to make more informed choices about
where to spend their precious time and money,
Be used to help students,
Protect student privacy,
Adhere to best practices in data security,
Reduce reporting burden for colleges and universities by
replacing the student components of IPEDS,
Better steward taxpayer dollars,
Uncover equity gaps so colleges and universities can
change policies and practices to better serve underrepresented
students, and
Align education with labor market demand and help
employers identify programs that are effectively preparing students for
the workforce.
Such a network would be limited in scope to answer only questions
of national interest about college access, progression, completion,
cost, and outcomes. Other systems, such as institutional data systems
and state longitudinal data systems would still be necessary to answer
more detailed questions specific to localized needs.
Student protection must be at the heart of any data system. It must
protect their privacy alongside their right to information, while
securing their data using industry leading protocols, such as those
developed by the National Institute for Standards and Technology (NIST)
and by the International Organization for Standardization (IOS) and the
International Electrotechnical Commission (IEC). \28\rong data
governance structures should minimize the data collected, ensure all
data are used in compliance with the law, provide notice to students of
the collection, prohibit the sale of data or use of the system for law
enforcement, issue penalties for misuse, conduct periodic audits, limit
disclosures, especially of personally identifiable information, and
craft provisions to handle a breach. Data should be used only to help,
and never to harm students or limit opportunity, and this principle
should serve as the foundation of all governance policy. IHEP's report,
A Blueprint for Better Information: Recommendations for a Federal
Postsecondary Student-Level Data Network, details recommendations for
building strong data governance policies.
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\28\ Grama, J.L. (2016). Understanding information security and
privacy in postsecondary education data systems. Institute for Higher
Education Policy. Retrieved from http://www.ihep.org/sites/default/
files/uploads/postsecdata/docs/resources/information--security--and--
privacy.pdf
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Why should the Federal Government act now?
In 2015-16, the Federal Government disbursed more than $157 billion
in Federal student aid, \29\d it needs better information to
steward that taxpayer investment. Furthermore, at kitchen tables around
the country, students like Ava are wrestling with life-changing
postsecondary decisions, making choices with their families about where
to go to college, what to study, and how to pay for it. Today they make
those decisions in an unbalanced marketplace with limited access to
information. For the marketplace to function effectively, all students
need access to high-quality information to help them make postsecondary
decisions. The same information is needed to help state and Federal
policymakers and college and university educators implement policies
and practices to help more students succeed, especially low-income
students and students of color.
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\29\ Baum, S., Ma, J., Pender, M., & Welch, M. (2017). Trends in
student aid 2017. The College Board. Retrieved from https://
trends.collegeboard.org/sites/default/files/2017-trends-student-aid--
0.pdf
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Federal Government's Unique Position
The Federal Government is uniquely positioned to compile that
information--even if non-Federal entities disseminate it. For example,
consider how valuable the weather app on your phone is. I know I use
mine daily to make decisions, such as what to wear and whether to walk
to work or take the bus. These decisions are important, but the
decision of where to go to college or what to study is a much higher
stake decision. Even privately developed weather apps are primarily
made possible by data from the National Oceanic and Atmospheric
Association's National Weather Service, housed at the U.S. Department
of Commerce. The data are made available to non-governmental experts to
translate into information for public use. Just as the Federal
Government is uniquely positioned to compile weather data because it
has access to satellites, for example, it also is the best option for
compiling data on education and the workforce--given the information it
already holds.
Federal Data on Workforce Outcomes
The Social Security Administration (SSA) and Internal Revenue
Service (IRS) hold administrative data on employment outcomes for
essentially all workers. \30\ fact, the Federal Government is the only
entity with such comprehensive wage record data, making it the best
source of workforce outcome information for colleges and universities.
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\30\ Zinn, R. (2016). Classroom to career: Leveraging employment
data to measure labor market outcomes. Institute for Higher Education
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/leveraging--employment--data--0.pdf
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Many states currently report workforce outcome data by linking
education data to unemployment insurance (UI) records. However, these
UI records--and the metrics they generate--are limited because they
omit Federal employees, military employees, the self-employed, and
people who move across state lines. \31\ Consider a state like
Virginia, for example, where many residents work just across the state
border in Maryland or Washington, DC, and many residents work for the
Federal Government. Federal sources fill these gaps by relying on tax
records for people nationwide, regardless of where they study, live, or
work.
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\31\ Zinn, R. (2016). Classroom to career: Leveraging employment
data to measure labor market outcomes. Institute for Higher Education
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/leveraging--employment--data--0.pdf
---------------------------------------------------------------------------
To be sure, these workforce data are highly sensitive and must be
closely secured. To provide the aggregate institution and program-level
information that students, policymakers, and institutions need, the
personally identifiable information (PII) on earnings should never be
shared externally and never even needs to be shared with ED. ED would
send student-level data organized in program and institution-level
cohorts to the Department of Treasury to link with individual-level
data on wages. Treasury would calculate the results for specific
programs and institutions and share the aggregate information back with
ED. The College Scorecard already uses this information-exchange
process to calculate employment outcomes for students who receive
Federal financial aid.
These data are illustrative of the value such information can
provide, but the Scorecard's employment metrics should be improved in
two ways. First, future efforts should report employment data at the
program-level, rather than only the institution-level because
employment outcomes vary by program even within institutions. \32\
Second, improved data metrics and data systems must include students
who do not receive Federal aid, as discussed below.
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\32\ Schneider, M. (2014). Measuring the economic success of
college graduates: Lessons from the field. American Institutes for
Research. Retrieved from http://www.ihep.org/sites/default/files/
uploads/postsecdata/docs/resources/leveraging/--employment--data--
0.pdf/http://www.air.org/sites/default/files/downloads/report/
Measuringpercent--thepercent--Economicpercent--Successpercent--
0Collegepercent--Graduates--Markpercent--Schneider.pdf; Carnevale,
A.P., Cheah, B. & Hanson, A.R. (2015). The economic value of college
majors. Georgetown University Center on Education and the Workforce.
Retrieved from https://cew.georgetown.edu/wp--content/uploads/The-
Economic-Value-of-College-Majors-Full-Report-Web.compressed.pdf
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Counting All Students
Existing employment metrics only include students who received
Federal Title IV financial aid because ED only has data on these
students in NSLDS, and statutory barriers prevent ED from collecting
student-level data on non-Title IV students. However, data on aided and
non-aided students are essential to answer critical questions about our
higher education system for several reasons:
1. All students--regardless of whether they receive
Federal aid--deserve quality information on education and employment
outcomes to help them make informed decisions. Only the Federal
Government has access to complete earnings information, so
institutions, states, and private entities cannot answer questions
about workforce outcomes as accurately as the Federal Government. To be
useful in a variety of contexts, workforce outcomes must include all
students.
2. About 30 percent of students do not receive Federal
financial aid, \33\d in some institutions and systems, even
greater proportions of students do not receive Federal aid. Consider
the California Community College System, where about 20 percent of
beginning students received Pell Grants and 2 percent received Federal
loans in 2016-17. Omitting non-federally aided students leaves out
about three-quarters of students (more than 1.5 million) in this large
system because many students forgo applying for Federal aid. \34\
metrics are calculated on only a subset of students--those receiving
Title IV aid--then the results will be skewed. Just as first-time,
full-time graduation rates do not paint a complete picture of
completion, neither do metrics limited to Title IV recipients. Both
students and institutions deserve information that reflects the full
student body.
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\33\ Executive Office of the President of the United States.
(2015). Using Federal data to measure and improve the performance of
U.S. institutions of higher education. Retrieved from https://
collegescorecard.ed.gov/assets/
UsingFederalDataToMeasureAndImprovePerformance.pdf
\34\ IHEP analysis of California Community Colleges Chancellor's
Office data. Retrieved from: http://datamart.cccco.edu/Services/
FinAid--Summary.asp
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3. Institutions as a whole, and all of their students,
benefit from taxpayer investment through Title IV aid and Federal
higher education subsidies. As such, outcomes data should reflect the
entire institution, not simply a fraction of its students.
4. Non-Title IV recipients also reap the benefits of
Federal investment in higher education. All tuition-paying students can
claim education tax benefits, and in fact, the IRS already holds some
data on essentially all students based on the 1098-T form, \35\ich is
used to process education tax credits and deductions. \36\
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\35\ Bergeron, D.A. (2016). Leveraging what we already know:
Linking Federal data systems. Institute for Higher Education Policy.
Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/linking--Federal--data--systems.pdf
\36\ Internal Revenue Service. (2016, September 23). Form 1098-T,
Tuition Statement. Retrieved from https://www.irs.gov/uac/form-1098-t-
tuition-statement
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5. Non-Title IV students must be included in a student-
level data collection if it is to replace the student components of
IPEDS and reduce burden on institutions. Many metrics in IPEDS, such as
graduation rates and enrollment figures, include aided and non-aided
students.
6. To promote equity and champion civil rights, data must
allow policymakers and institutions to identify and close socioeconomic
gaps in college access, success, and outcomes. To accomplish this, we
need quality information on low-income students (i.e., Pell Grant
recipients) and non-low-income students (i.e., students who do not
receive Federal aid).
Conclusion
Our country was built in part on the idea that, with hard work and
a good education, any American can climb the ladder of social and
economic mobility. And by 2020, there will be 55 million new job
openings, \37\oviding the very economic opportunity that can help our
cities and communities thrive. Nearly two-thirds of all jobs will
require some postsecondary education and training. \38\
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\37\ Carnevale, A.P., Smith, N., & Strohl, J. (2013). Recovery:
Job growth and education requirements through 2020. Georgetown
University Center on Education and the Workforce. Retrieved from
https://cew.georgetown.edu/wp-content/uploads/2014/11/
Recovery2020.FR--.Web--.pdf
\38\ Carnevale, A.P., Smith, N., & Strohl, J. (2013). Recovery:
Job growth and education requirements through 2020. Georgetown
University Center on Education and the Workforce. Retrieved from
https://cew.georgetown.edu/wp-content/uploads/2014/11/
Recovery2020.FR--.Web--.pdf
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Each day, millions of Americans are wisely investing in their
futures by acquiring new knowledge and skills in college classrooms and
are working hard to climb that ladder.
Senators, you are entrusted to responsibly steward taxpayer dollars
and make sound investments to help students access and succeed in our
higher education system. Certainly, you should act on the quality data
you do hold now, like information on student loan outcomes. But as you
consider your responsibility and seek to hold institutions accountable
to taxpayer dollars, I ask you to consider the key questions you cannot
currently answer and the appropriate means for gathering and sharing
that information.
A secure, privacy-protected student level data network would
address the shortcomings of our current system by producing the
information necessary to inform policymakers' decisions.
Before Ava decides exactly where to invest her time and resources,
she and millions of others just like her deserve answers to these same
questions.
As you work to reauthorize HEA, consider the questions you cannot
answer. Consider your role in protecting students and taxpayers. And
consider the student whose college choice will define her future. Now
is the time to act. Now is the time to answer unanswered questions. Now
is the time to tighten the rungs of the ladder of economic mobility.
Thank you.
______
[summary statement of mamie voight]
The research is abundantly clear: investing in a college education
pays off. \1\ But while college is often a worthwhile investment,
students, policymakers, and institutions cannot answer crucial
questions about which programs at which institutions provide an
adequate return on this investment, and for which students. This
failure to answer key questions hampers policymaker efforts to design
and implement accountability systems that manage the risk to taxpayers
and students.
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\1\ Ma, J., Pender, M., & Welch, M. (2016). Education Pays 2016.
The College Board. Retrieved from https://trends.collegeboard.org/
sites/default/files/education-pays-2016-full-report.pdf
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Those risks are real, especially for the most vulnerable students
with the most to gain from a higher education, but also the most to
lose if things go wrong. College is a pathway out of poverty, yet where
a student goes to college ultimately shapes her opportunity to climb
those rungs. Outcomes vary dramatically across institutions and
programs--even those enrolling similar types of students--so quality
data about outcomes are necessary to illuminate those patterns in ways
that can inform policymaker efforts to protect taxpayer dollars.
Any accountability system--whether it be market-based
accountability, bright-line indicators, incentive structures, or other
systems--must be grounded in reliable evidence. This need for evidence
holds regardless of who or what is driving the accountability system:
student choice, the Federal Government, state governments, or
accreditors.
While some postsecondary data, such as information on the student
loan program like cohort default rates and repayment rates, are
relatively complete and of high-quality, much of our data on student
outcomes are insufficient. Our system is data rich, but we are
information poor, relying on a duplicative, inefficient, and cumbersome
postsecondary data infrastructure designed for yesterday's college and
yesterday's student. As a result, we cannot answer many basic questions
about college access, success, price, and post-college outcomes.
However, a solution exists. Members of both the Senate and the
House have introduced the College Transparency Act, a bipartisan
solution to create a secure, privacy protected student-level data
network. More than 130 organizations, representing students,
institutions, veterans, college access providers, and employers, have
endorsed the College Transparency Act, which would publicly report
aggregate institution and program-level outcomes to inform student,
policymaker, and institutional decisions. Critically important, these
aggregate outcomes would include information on all students, not only
those who receive Federal aid. Counting all students is necessary to
accurately reflect institution and program outcomes and to evaluate
equity.
Senators, you are entrusted to responsibly steward taxpayer dollars
and make sound investments to help students access and succeed in our
higher education system. Certainly, you should act on the quality data
you hold now, such as information on student loan outcomes. But as you
undertake your efforts to responsibly steward taxpayer dollars and
provide students with the information they need to make decisions, I
ask you to consider the key questions you cannot currently answer and
urge you to implement sound policy that will advance the use of quality
data and evidence.
______
The Chairman. Thank you, Ms. Voight.
Dr. Cruz, welcome.
STATEMENT OF JOSE LUIS CRUZ, PH.D., PRESIDENT, HERBERT H.
LEHMAN COLLEGE, CITY UNIVERSITY OF NEW YORK, BRONX, NY
Dr. Cruz. Chairman Alexander, Ranking Member Murray, and
Members of the Committee, thank you for the opportunity to
testify before you this morning on the critical issue of
accountability in higher education.
My name is Jose Luis Cruz, and I am the President of Lehman
College of the City University of New York, a beautiful campus
located in the proud, resilient borough of the Bronx. Our
college serves approximately 13,000 undergraduate and graduate
students in 90 degree programs, plus 12,000 students in
certificate and workforce development programs. Fifty percent
of Lehman undergraduates have a household income of $30,000 or
less, 80 percent are students of color, and 41 percent speak a
language other than English at home. Lehman's students embody
the aspirations of over 140 ancestries and exhibit the drive of
those who strive to make their life in the great city of New
York.
As the Committee moves to reauthorize the Higher Education
Act, I hope you proceed in a thoughtful, purposeful, and
bipartisan way that recognizes the fundamental American values
that are at stake and that acknowledges that the resulting
legislation will impact the America of tomorrow in ways as
significant as the overhaul of the tax code, the
reconceptualization of our health care system, and our
immigration laws.
We're here to discuss accountability and the role equity
must play to ensure colleges help students of color and
students from low-income families succeed. To better serve
students, the new HEA should protect them from the tyranny of
low expectations, defend their right to meet their full
potential, and provide a level playing field as they work to
improve their lot in life through a post-secondary education.
We also need to remember that because the Higher Education
sector is diverse, a Federal accountability system must be
tailored to account for differences in institutional missions,
student demographics, program objectives, and governance
structures. But for the system to work, we need to have the
courage to confront those who dare abuse it.
We cannot forget that what schools do matters. Two schools
serving very similar populations can have vastly different
outcomes. My former school, Cal State-Fullerton, was just
highlighted for having a graduation rate for Latino students
that is 24 points higher than one of its peer institutions, the
University of Texas-San Antonio, despite the fact that both are
large, public, moderately selective Hispanic-serving
institutions with comparable levels of Latino and low-income
students.
Fullerton's success was no accident. It was the result of
very intentional action, and the impetus for that work was
equity-focused accountability from institutional and state
leaders. The imperative to focus on equity cannot be
overstated. The original HEA passed in 1965, yet low-income
students today are only just beginning to catch up to the rate
their high-income peers enrolled in college were 40 years ago.
One reason for this disparity in college going, a factor that
also manifests itself in gaps in college completion, is that to
this day, we as a country continue to give students from
historically underserved communities less of the things they
need.
We give them less funding, less access to effective in-
field experienced teachers, and less access to a college or
career-ready curriculum in advanced course work. Moreover, just
the fact that low-income students and students of color who do
enroll in college are far less likely to enroll in institutions
where most students graduate and far more likely to enroll in
those institutions, including in the for-profit sector, that
graduate fewer of their students and create disproportionate
debt.
The good news is that designing an equity-focused
accountability system is possible. Here are several
recommendations.
First, make sure equity matters in accountability metrics.
Students who aren't measured don't count. If we want
institutions to pay attention to the outcomes of low-income
students and students of color, we must make the same shift our
country has made in K-12 to demand disaggregated outcomes data.
There should be minimum standards for the enrollment of Pell
students, graduation rates, and loan repayment for all
students, and by race and income. We need to couple increased
expectations with focused investments and provide time for
campuses to improve before any sanctions attach. The ASPIRE
Act, sponsored by Senator Isakson and Senator Coons, follows
this model.
Second, work to provide focused investments in building the
capacity of colleges to use evidence-based innovation,
particularly for the two-and 4-year public institutions that
serve the majority of America's students. You heard last week
from my colleague about CUNY ASAP. Programs like that show what
is possible with the right incentives and supports necessary to
ensure that all students have equitable opportunities and
outcomes in higher education.
Finally, be unwavering in your commitment to protecting
students and taxpayers from fraud and abuse. Congress must
ensure that every dollar the Federal Government invests in
higher education is used effectively, efficiently, and in the
best interest of the increasingly diverse public. An equity-
focused accountability system for higher education can address
this need and help improve student outcomes across the board by
better serving our historically underserved low-income students
and students of color.
Thank you.
[The prepared statement of Dr. Cruz follows:]
prepared statement of jose luis cruz
Chairman Alexander, Ranking Member Murray, and Members of the
Committee, thank you for the opportunity to testify before you this
morning on the important issue of accountability in higher education.
My name is Jose Luis Cruz, and I am the President of Lehman College
of The City University of New York. Located in the storied and
resilient borough of The Bronx, Lehman College serves as a driver of
transformative change to approximately 13,000 undergraduate and
graduate students across 90 degree programs, plus 12,000 students in
certificate and workforce development programs. Fifty percent of Lehman
undergraduates have a household income of $30,000 or less; 80 percent
are students of color; and 41 percent speak a language other than
English at home. Lehman's students embody the aspirations of over 140
different ancestries and exhibit the drive of those who strive to make
their life, in the world's greatest City, the city of New York.
The perspectives I bring today have been shaped by my experiences
as an undergraduate and graduate student who benefited from a quality
public higher education thanks to the support of many Federal and state
aid programs; a parent of five children--one who is currently
completing her undergraduate degree in a public research institution
and two who completed undergrad and grad degrees from private
institutions within the past year; a faculty member and administrator
at three large university systems; and a former vice president of
Higher Education Policy and Practice at The Education Trust.
On the Formidable Goal of HEA Reauthorization
Before I present my thoughts about the equity implications of
accountability and recommendations for how best to consider equity in
accountability, I want to commend you, Mr. Chairman, and Ranking Member
Murray, for convening this hearing to ``explore how Federal
policymakers can modernize Federal higher ed accountability to better
protect students and taxpayers and ensure schools provide students the
opportunity to earn certificates and degrees that are worth the time
and money students spend on them.''
It is my position that to achieve this goal, the Committee must
proceed in a thoughtful, purposeful, and bipartisan way that recognizes
the fundamental American values that are at stake in the
reauthorization of the United States Higher Education Act and
acknowledges that the legislation that results today will impact the
America of tomorrow in ways as significant as the overhaul of the tax
code, the reconceptualization of our health care system, and the
redesign of our immigration system.
As it works to do so, it is my hope that the Committee will take
the time to fully parse, discuss, and reach a shared understanding of
the goal they are trying to meet--as my initial attempt to do so below
suggests it is a formidable goal indeed.
First, the Committee seeks to modernize Federal higher ed
accountability. The use of the word modernize suggests an interest in
adapting the Higher Education Act to better respond to the challenges
and opportunities faced by our country's increasingly diverse
population as it relates to our Nation's multisector system of higher
education. This is a most worthy objective as there are certainly
myriad areas ripe for intervention, ranging from data transparency,
misaligned incentive structures, lack of effective controls for toxic
programs, etc. But it is important that the objective behind the word
modernize not be misconstrued to mean a broad, indiscriminate
dismantling of the regulatory structure that is in place under the
guise of ``less regulations lead to better outcomes'' mantra that is so
pervasive in our political discourse. In seeking to remove the
regulatory burden, I encourage the Committee to first ask if the right
inducements and system dynamics are in place to avoid regrettable
unintended consequences that could exacerbate what one can only hope
are the unintended outcomes of our current system. Indeed, it's
important to remember that many existing regulations were put in place
to address real issues with low-quality institutions that leave
students worse off than if they had never attended. While we should be
thoughtful about the burden we are placing on good actors, protecting
students must be our first priority in any and all regulations.
Second, the Committee wants an accountability system that will
better protect students and taxpayers. In my opinion, to better serve
students, the new HEA should protect them from the tyranny of low
expectations, defend their right to seek to meet their full potential,
provide a level playing field as they work to improve their lot in life
through postsecondary education, and recognize that institutions play a
big role in determining whether or not a student completes college or
defaults on her student loans. And that the best way to protect
taxpayers is by not losing sight that the overall return on their
investments in individual students and the postsecondary institutions
that educate them are not only measured by the cost of the Federal
student loan program, but also in terms of the contributions to the
public good that students and institutions make.
Third, the Committee wants a reauthorized HEA that will ensure
schools provide students the opportunity to earn certificates and
degrees that are worth the time and money students spend on them. To
achieve this objective, in crafting the new HEA, the Committee should
recognize that what schools do matters; that while the standards for an
accountability system could be designed such as to apply for
institutions across all sectors of higher ed, a differentiated set of
inducements and controls is needed to account for differences in
institutional missions, student demographics, program objectives, and
governance structures; and that for the incentives and penalties
contemplated in the HEA to be credible, we need to have the courage to
confront those who are currently abusing our accountability system.
The good news is that all of these considerations can be taken into
account if the Committee views the hard, important work ahead through
an equity lens. After all, as I indicated in my testimony to the U.S.
House of Representatives Committee on Education and the Workforce on
Feb. 7, 2017, if we are to preserve our democratic ideals, secure our
Nation, and compete in the global economy, we must significantly
improve postsecondary educational attainment. And because of current
demographic and economic shifts, the only way we can do this is by
ensuring quality higher education options are accessible and affordable
to all members of our increasingly diverse population.
Of course, in today's America this is easier said than done--mainly
because of how inequitable policies and practices across each level of
the educational pipeline have undermined our ability to fulfill our
twin promises of opportunity and upward mobility for all who work hard
to reach their full potential.
The Equity Imperative
Since the original Higher Education Act (HEA) was passed in 1965,
the U.S. has made substantial progress in college access. College-going
rates have climbed for students from all economic and racial groups.
Yet despite this progress, low-income students today are only just
beginning to catch up to the rate their high-income peers enrolled in
college over 40 years ago.
One reason for this gap in college-going--a factor that also
manifests itself in gaps in college completion--is that to this day, we
as a country give students from historically underserved communities
less of all the things they need: less funding; less access to
effective, in-field, experienced teachers; less access to a college or
career-ready curriculum; and less access to advanced coursework.
Moreover, there's the fact that low-income students and students of
color who do enroll in college are far less likely than other students
to enroll in institutions where most students graduate and far more
likely to enroll in the institutions, including those in the for-profit
sector, that graduate few of their students and create disproportionate
debt. \1\ These trends put students in a precarious position to
successfully repay their student loan debt and emphasize the need to
ensure colleges responsibly recruit, enroll, and graduate their
students.
---------------------------------------------------------------------------
\1\ Ed Trust analysis of IPEDS Fall enrollment, Fall 2014 (by
race) and NCES National Postsecondary Student Aid Study (NPSAS:12),
2011-12 (by Pell recipient status).
---------------------------------------------------------------------------
These disparities are complicated further by the negative impact
that increased institutional costs, state disinvestments (down 20
percent since 1990), inequitable state financial aid programs, and
insufficient maximum award levels in the Pell Grant program (down since
its inception from roughly 75 percent of the cost of attending a public
4-year college to 30 percent) have had on the total cost of attendance
for our lowest income students. The net effect? Today, low-income
students must find a way to finance an amount equivalent to 76 percent
of their family's annual income to attend a public university for 1
year, even after accounting for all grant aid--a far higher burden than
the 17 percent figure required for the highest income students. \2\
---------------------------------------------------------------------------
\2\ Ed Trust analysis of NPSAS:12, using PowerStats. Results based
on full-time, full-year, one-institution dependent undergrads at public
and private nonprofit 4-year colleges.
---------------------------------------------------------------------------
These intergroup inequities have a profound impact on individual
lives and our country's competitiveness. For every 100 white
kindergartners, roughly 90 end up with a high school diploma, and, of
those, 40 get at least a bachelor's degree. Plenty of opportunity for
improvement, to be sure. But the bachelor's degree attainment rate
among black adults is just over half that of white adults, and among
Latino adults, only just over one-third. Similarly, students from high-
income families are approximately five times as likely as students from
low-income families to obtain a bachelor's degree by age 24.
It is because of the profound effect this state of affairs has on
the ability of working families to succeed, the competitiveness of our
economy, the security of our country, and the merit of our meritocracy,
that I believe the eradication of intergroup inequities to be among the
most important challenges that higher education institutions--and our
nation--will face in the years ahead. To meet this challenge, we must
develop, implement and scale equity-driven policies and practices that
will restore faith in Horace Mann's articulation of education being
``beyond all other devices of human origin. . .the great equalizer of
the conditions of men, the balance-wheel of the social machinery.''
A Reason for Hope: Similar Institutions, Similar Students, Vastly
Difference Outcomes
The good news is that--even under the current regulatory
structure--there are many higher ed institutions that are bucking these
trends, demonstrating that what institutions do matters in determining
whether or not a student's demography will determine their destiny.
Indeed, evidence suggests that similar students can have drastically
different outcomes at campuses serving similar students with similar
resources.
For example, in The Education Trust's recent report on Latino
student success, they found that two campuses, California State
University-Fullerton and The University of Texas at San Antonio serve a
student body that is nearly 40 percent Latino and nearly half low
income; however there is an over 20 percentage point gap in their
overall graduation rate. And what's interesting to note is that
Fullerton's success was the result of intentional action, and the
impetus for that work was equity-focused accountability from
institutional and state leaders.
I know this from first-hand experience as I served as the Provost
and Vice President of Academic Affairs at Cal State Fullerton and am
now using the experiences lived and lessons learned to guide my work as
president of Lehman College of The City University of New York. And I
know that it can be replicated, as my work with the Access to Success
Initiative at the close of the past decade suggests.
So, the question really is how do we infuse equity into the
reauthorization of HEA to replicate these results? I am pleased to
present the following recommendations for your consideration.
Recommendations
First, I recommend that the Committee privilege equity in
accountability metrics. If issues of equity are not intentionally
addressed in policy design, outcomes and inequity may increase
simultaneously. This is what we have seen happen in a number of states
with performance-based funding where the lack of intentionality on this
front when establishing financial incentives to hold campuses more
responsible for student completion outcomes resulted in negative
impacts on issues of equity, as campuses responded by becoming more
selective in order to improve their outcomes
Although most existing and emerging state policy proposals
incentivize completion for Pell grant recipients as a way to address
equity, there are additional considerations to ensure equity isn't just
symbolic, but is a priority. Equity metrics should be mandatory, not
optional and ensure equity measures are given their proper weight, so
they are not perceived as an optional, or insignificant bonus on top of
a rewards system that clearly prioritizes overall completion. And they
should not be limited to income, which is unable to account for racial
inequality. Students of color less likely to apply, persist, complete
college, and are more likely to have unmet financial need, thus
policies should include incentives for enrolling and graduating
students of color. The Center for Postsecondary and Economic Success at
the Center for Law and Social Policy (CLASP) suggests in the context of
state Outcomes Based Funding that the weight of the equity measures
should be sufficient to counteract the strength of the incentives to
increase selectivity.
In the ``Tough Love'' report, The Education Trust suggested that
Federal accountability policy should redefine the standards, so that
``low performing'' doesn't just mean low graduation rates, but also
means an unacceptable effort to enroll and graduate low-income
students. Ed Trust suggested reducing or eliminating financial
investments in colleges that were in the bottom 5 percent of Pell
enrollment. This idea was also incorporated into the ASPIRE Act,
introduced by Senators Isakson and Coons, which suggested giving
colleges time to improve Pell enrollment or pay a penalty that would be
redirected to under-resourced colleges struggling to graduate their
students.
More recently, Georgetown's Center on Education and the Workforce
suggested that selective campuses with the highest completion rates can
afford to increase their enrollment of Pell Grant recipients to 20
percent, a strategy they believe will increase outcomes for low income
students.
These increased expectations must be coupled with increased
investment and time for campuses to improve. Institutions should also
be provided with technical assistance and rewards or incentives for
making improvements. It is especially important that these resources be
targeted to campuses serving large proportions of low-income students
that are making active efforts to improve completion rates. For
institutions already on the right track when it comes to access and
completion, new incentives-both financial and non-financial-can be
provided.
While there should be some consequence for a failure to improve, we
must stop thinking about ``accountability'' as meaning all-or-nothing
eligibility for Title IV aid, except in the most egregious cases of
fraud and abuse. And we would do well to address the causes of
regrettable outcomes, not just their symptoms.
The system of higher education is extremely stratified; students
who require the most support are concentrated at institutions with the
fewest resources and the lowest completion rates. Thus, Federal
accountability should be designed in way that considers campus type,
resources, scope, size, and mission when defining institutional success
and identifying peer groups. For example, limiting Title IV eligibility
for institutions that may have low completion rates, but enroll larger
proportions of low income students and students of color could have a
major impact of higher education equity. Therefore using gradual
sanctions like those suggested by The Institute for College Access and
Success (TICAS), before Title IV eligibility loss, and providing
support for improvement at at-risk institutions can ensure
accountability policies enhance opportunities for students, rather than
limit them.
Often proposals, like risk sharing, aimed at holding institutions
of higher education more responsible for poor outcomes and increasing
costs, use students' ability to repay their student debt--as measured
by cohort default and/or repayment rates--as a primary indicator of
performance. These metrics are important because the student debt
crisis has had a disproportionate impact on students of color,
especially Black students who are nearly 20 percentage points more like
to borrow student loans and Black Bachelor's degree holders are five
time more likely to default on their student loans than White college
dropouts. But the metrics simply describe the symptom. And as it turns
out, in this case, rather than limit access to loans or repayment
options, we'd do better by attacking the underlying causes. Namely, the
facts that Black students disproportionately enroll in low-performing
colleges, particularly for-profit institutions that have lower
graduation rates and higher cohort default rates \3\ and that the
strongest predictor of loan default is whether or not a student
completes college. Thus, limiting the risk to taxpayers associated with
our $1.3 trillion Federal loan portfolio is more about focusing on
completion and strengthening protections for students against low-
quality, fraudulent and predatory for-profit institutions, and less
about the protections we provide borrowers (e.g., income-based
repayment plans).
---------------------------------------------------------------------------
\3\ Ed Trust analysis of IPEDS Fall enrollment, Fall 2014 (by
race)
---------------------------------------------------------------------------
Second, I recommend that the Committee work to incentivize
intentionality, unleash innovation, and reward success. Enrolling low
income students and students of color is not an excuse for poor
outcomes. As you look to reauthorize the Higher Education Act, you have
a prime opportunity to provide the incentives and supports necessary to
ensure that all students have equitable opportunity and outcomes in
higher education. An equity-focused accountability is a key lever for
making that change.
There is evidence that certain student behaviors, such as taking
summer courses, can increase their likelihood of completing their
degree program. Federal policy can be designed in a way that
incentivizes these behaviors, ultimately leading to increased college
completion. For example, students who are able to work less and take
more courses have better grades are more likely to complete college,
than their peers who work more hours and take fewer courses. Therefore,
outcomes driven policies should provide additional resources and
incentives for students to take more credits, such as year-round Pell
grants-which I am grateful Congress has reinstated--and financial aid
that can be applied to non-tuition, living expenses to ensure students
can afford to take more credits per semester and complete college at
higher rates.
Federal policy designed to increase college completion must invest
in the capacity of campuses to better serve students, especially those
that have the least resources, but maintain a commitment to educating
the students least likely to complete college. This capacity building
should be centered on campuses implementing evidence based strategies,
such as those used by Georgia State University or in City University of
New York's Accelerated Study in Associate Programs (ASAP), that are
shown to improve student outcomes.
The average campus leader can identify several practices that can
improve completion, like co-requisite remediation, guided pathways,
intrusive advising, and data-based decisionmaking, but often lack the
financial or human capital needed to effectively implement these
strategies. Implementing these strategies can improve student outcomes
and ultimately save campuses resources that they can apply to
sustaining and expanding these initiatives, however, many campuses
require an initial investment to help them build the infrastructure and
human capital needed to start the initiative.
There are examples of emerging proposals, such as the ASPIRE Act
that couples the introduction of increased accountability for
completion, with focused investments in the capacity of campuses-
particularly those that are struggling but striving to improve--to
implement effective strategies. I appreciate Senator Isakson's work on
this legislation and hope to see Congress continue to explore its
ideas. More broadly, Congress should also pursue additional investments
in improvement targeted at campuses like community colleges and
Minority Serving Institutions that serve large proportions of low
income students and students of color, but also have limited
institutional resources.
Third, I recommend that the Committee be unwavering in its
commitment to protect students and taxpayers from fraud and abuse. For
proprietary colleges, this means they must deliver on the promises of
success they are making to students and taxpayers alike. The promise is
clear and unambiguous, seen in the recruitment ads depicting happy
graduates working in state-of-the-art jobs they acquired thanks to
their newly earned for-profit college degrees. The ads of course do not
include the ``results are not typical'' or ``individual results may
vary'' disclaimers we are accustomed to seeing when the exception,
rather than the rule, is showcased. But, unfortunately, they do present
the exception. The data show that rather than getting a relevant
credential and a job that pays a living wage, too many students walk
away from these institutions with nothing but excessive debt and,
ultimately, blame for their institutions' low graduation and high loan
default rates.
On March 10, 2011, I testified before this Committee. I
respectfully submit said testimony into today's record. At the time, I
unequivocally stated that for-profit college companies demanded new
attention and a new approach to regulation, because existing structures
were ill-equipped to deal with the aggressive business models that
fueled their growth.
Since then, the implementation of the gainful employment rule,
restrictions on incentive compensation, and enactment of borrower's
defense have gone a long way to protecting taxpayers and students from
the worst corporate offenders. But it is extremely worrisome to see the
current Department of Education walk away from these protections when
they should in fact be strengthening them.
As part of this accountability conversation, we should be
continuing these guardrails in addition to taking further steps such as
requiring accreditation agencies to emphasize student outcomes and
measures of academic quality and financial stability in their
evaluations and accreditation decisions; and strengthening Federal aid
eligibility requirements like the 90/10 rule so that for-profit
institutions are not mostly publicly funded.
We can't meet the high-skill workforce demands of tomorrow unless
we cleanup the for-profit college sector today. We have to rein in
those that abuse our social investment and prey on our underserved
population.
The Case for Investments in Public 2-year & 4-year Institutions
Having been allowed to weigh in on the Committee's deliberations,
it would be irresponsible of me to not use the occasion to remind its
Members of the incredible opportunity the reauthorization of the Higher
Education Act presents to unleash the transformative power of our
country's public 2-year and 4-year institutions, the institutions that
because of who and how many they serve, predominantly and
disproportionately shoulder the responsibility of increasing
educational attainment in America.
Because, in my opinion the public 2-year and 4-year sector
represents our country's best bet to once again lead the world in
educational attainment. Particularly if we can find a way to build
capacity within the sector so those institutions that are outperforming
their peers, can model to others how they too can take more intentional
action to better serve the millions of students who are coming of age
in America today, but who--because of the color of their skin, the
balance of their checking account, their place of origin, and/or the
tenets of their faith--have historically been underserved as they have
sought to meet their full potential.
Imagine the benefits that would accrue from additional investments
in institutions such as The City University of New York--which
according to The Equality of Opportunity Project has propelled almost
six times as many low-income students into the middle class and beyond
as all eight Ivy League campuses, plus Duke, M.I.T., Stanford, and
Chicago, combined--that would allow them to scale their best practices
to accelerate progress on their goals to expand access, improve
learning, increase graduation rates, reduce time to degree, and prepare
students for meaningful employment and future study.
I, for one, have a clear vision of what such investments would do
for Lehman College: it would serve as a catalyst for the urgent action
required to create the conditions whereby the promise of prosperity of
a resurgent Bronx is within the reach of all those who seek to meet
their full potential--action captured in our college's goal to double
from 45,000 to 90,000 the number of high-quality degrees and
credentials that lead to fulfilling careers and future education that
we produce by the year 2030, an initiative we refer to as 90x30.
This is no easy feat. The Bronx is moving forward and trending
upward--median income levels are up and unemployment rates are at
historic lows. But the borough's poverty rates are on the rise and not
all families are positioned to benefit from our booming economy. The
largest demographic living in poverty in the Bronx today? Females aged
25-34. The income mobility rate for children in poor families? Among
the lowest in the Nation. The growth rate of the school-age population
in the borough? Among the fastest in the state. And at 28 percent, the
Bronx is next to last in educational attainment of the 62 counties in
New York State.
The magnitude of this challenge could paralyze most. But imagining
what a better educated Bronx would look like provides a powerful
impetus for us to forge ahead.
Now, the crisis of educational inequality is not a local issue. But
to truly reverse existing inequities in higher education, we need
equity-driven policies and practices that will allow those institutions
who can disproportionately contribute to our national goals to advance
their missions and meet their full potential as vehicles of social
mobility and drivers of transformative in their communities.
Conclusions
Accountability in higher education is not a new conversation, nor
is it a partisan one. Many of the ideas presented herein and others
that will surely be discussed today-including the importance of looking
at outcomes in a disaggregated way by student group-have been discussed
since the George W. Bush administration with the Spellings Commission.
It is time for those conversations to ripen into policy action.
Congress must ensure that every dollar the Federal Government
invests in higher education is used effectively, efficiently, and in
the best interest of the increasingly diverse public. It is clear that
a thoughtful, equity-focused accountability system for higher education
is both necessary to safeguard the money invested by the taxpayers,
protect students from fraudulent and predatory institutions, and
improve student outcomes across the board, but particularly for low-
income students and students of color.
I believe that the reauthorization of the Higher Education Act can
help institutions make it not only possible, but probable that more
low-income students and students of color can rise to the middle class,
paving the way for less inequality, more social mobility, and better
overall prosperity in America. And, as I've stated herein, I believe
that the best ways to do this are by applying an equity-lens to the
policies and practices that shape the work of higher education
institutions across our Nation and targeting resources to those 2-year
and 4-year public institutions that have demonstrated the capacity to
transform lives and communities.
On behalf of Lehman College, please know that we welcome the
opportunity to work with you and other institutions across the country,
as we move to do the hard, but important work required to ensure that
our higher education system works for all Americans.
Thank you.
______
[summary statement of jose luis cruz]
Chairman Alexander, Ranking Member Murray, and Members of the
Committee, thank you for the opportunity to testify before you this
morning on the critical issue of accountability in higher education.
My name is Jose Luis Cruz, and I am the President of Lehman College
of The City University of New York, located in the proud, resilient
borough of The Bronx.
We are here to discuss accountability and the role equity must play
to ensure colleges help students of color and students from low-income
families succeed. To better serve students, the new Higher Education
Act (HEA) should protect them from the tyranny of low expectations,
defend their right to seek to meet their full potential, provide a
level playing field as they work to improve their lot in life through
postsecondary education and recognize the critical role institutions
play in a student's success.
We also need to remember that the higher education sector is
diverse and a Federal accountability system must be tailored to account
for differences in institutional missions, student demographics,
program objectives, and governance structures. But, for accountability
to work, we need to have the courage to confront those who are
currently abusing the system.
The good news is that designing an equity-focused accountability
system is possible. Here are several recommendations.
First, equity must matter in accountability metrics. There should
be minimum standards for the enrollment of Pell students, graduation
rates, and loan repayment-for all students and by race and income. We
need to couple increased expectations with focused investments and
provide time for campuses to improve before any sanctions attach.
Second, work to provide focused investments in building the
capacity of colleges to use evidence-based innovation, particularly for
the 2-and 4-year public institutions that serve the majority of
America's students. You heard last week from my colleague about CUNY
ASAP. Programs like that show what is possible with the right
incentives and supports necessary to ensure that all students have
equitable opportunities and outcomes in higher education.
Finally, be unwavering in your commitment to protecting students
and taxpayers from fraud and abuse.
Congress must ensure that every dollar the Federal Government
invests in higher education is used effectively, efficiently, and in
the best interest of the increasingly diverse public. An equity-focused
accountability system for higher education can address this need and
help improve student outcomes across the board by better serving our
historically underserved low-income students and students of color.
______
The Chairman. Thank you, Dr. Cruz.
Mr. Delisle, welcome.
STATEMENT OF JASON D. DELISLE, RESIDENT FELLOW, AMERICAN
ENTERPRISE INSTITUTE, WASHINGTON, DC
Mr. Delisle. Thank you. Chairman Alexander, Ranking Member
Murray, and Members of the Committee, thank you for the
opportunity to testify today about the student loan program,
and costs and risks to taxpayers, and accountability policies.
I want to say before I get started that my views today are
my own. They are not the views of the American Enterprise
Institute, which to the best of my knowledge doesn't have any
views about student loans.
Chairman Alexander, you already mentioned that the student
loan program is large. It makes about $100 billion a year in
loans, and this accounts for about 90 percent of all lending,
college lending and higher education lending in the economy.
There are no income limits, no means testing for the loans, and
for graduate students there's not even a cap on the amount they
can borrow. They can borrow up to the full cost of attendance,
effectively no questions asked.
In recent years we've had a big run-up in the amount of
outstanding debt. There's $1.3 trillion in Federal student
loans outstanding. Just to put that into context, that means
the Federal student loan program now rivals the FHA's single-
family home mortgage program, making those two programs the
largest Federal credit programs the government operates.
So given the size of the Federal loan program, I think it's
important that we really understand how much it costs, and
getting a handle on those costs shows us that there is a need
for policies that protect against waste, fraud, and abuse, and
that borrowers who attend poorly performing schools and low-
quality schools and overpriced programs are going to struggle
to repay their loans and increase costs imposed on taxpayers.
So let me go through some of those costs.
One is defaults. When students default on their loans, it
costs taxpayers money. According to the Department of
Education, it's about $4 billion a year. The reason why this
costs money is the Department of Education, even though it's
pretty good at getting the money back, it is still unable to
recoup all of the costs that it incurs in collecting the money,
and there is also a lot of time spent. So a dollar that you're
owed today but is maybe collected 20 years from now isn't worth
a dollar anymore.
Now, we have the cohort default rate that, as
accountability policy, sort of gets at this. But another big
source of cost that's even larger than default that we really
have no accountability policy aimed at is the cost of the
income-based repayment program. So when students repay their
loans using the income-based repayment program, payments are
generally low relative to what would be required to fully pay
off the loan. So the Department of Education estimates that a
lot of students who are using this program are going to have
their loans forgiven, and currently a lot of students are using
this program. There is about $46 billion out of the $100
billion lent each year that the Department of Education is
expecting will be repaid to this program. That equates to about
a $12 billion annual cost for income-based repayment,
significantly larger than the cost of defaults, about three
times.
Another source of cost is from discharges due to fraud,
closed schools. This is becoming more of an increasing issue.
The Department of Education just wrote down the value of the
outstanding loan portfolio by $5 billion because their
estimates show that there's going to be more discharges due to
closed schools and fraud and misrepresentation.
Another source of cost is just the overall cost of the loan
program. A lot of people believe that the loan program makes
money for the government. The CBO puts out statistics that
appear to show that this is the case. But the CBO, the
Congressional Budget Office, also warns that these estimates
``do not provide a comprehensive measure of what Federal credit
programs actually cost the government and, by extension,
taxpayers.'' So the agency has suggested a more comprehensive
measure of cost called fair value accounting, and when the CBO
uses that method they show the program is expected to cost at
least $183 billion over the next 10 years. That's a very
significant cost. So those who would say we can sort of turn a
blind eye to accountability policies because the program
doesn't lose money needs to look at the CBO's estimates
according to fair value.
In my testimony, my written testimony, I go through a
number of principles that I think will help the Committee
develop better accountability policies. I'm a little bit short
on time and I won't go into them here, but I'll be happy to
talk about them in some of the questions.
Thank you. That concludes my testimony.
[The prepared statement of Mr. Delisle follows:]
prepared statement of jason d. delisle
Chairman Alexander, Ranking Member Murray, and Members of the
Committee, thank you for the opportunity to testify about the risks and
costs in the Federal student loan program and the need for
accountability policies for higher education institutions.
The Federal Government's Direct Loan program dominates the student-
loan market today, issuing 90 percent of all loans made across the
country each year. Students pursuing everything from short-term
certificates to master's degrees qualify for nearly $100 billion in
loans every year at terms more generous than most private lenders would
offer.
The Federal role in higher-education lending has grown ever since
lawmakers enacted the first loan program under the National Defense
Education Act of 1958. The Higher Education Act of 1965 expanded access
to loans to more colleges and students through the Guaranteed Student
Loan Program, but the interest rate subsidies it provided were
restricted to students from low-income families. In 1980, Congress
created a loan program for parents of undergraduates (Parent PLUS), and
then in 1992, eliminated annual and lifetime borrowing limits for those
loans. That year, lawmakers also authorized the Unsubsidized Stafford
Loan program, which allows all undergraduate students to borrow Federal
loans regardless of their financial circumstances. In 2006, Congress
created the Grad PLUS loan program, which removed limits on the amount
graduate students could borrow. \1\ This expansion, along with rising
college costs and increasing student enrollments, has led to a rapid
increase in the stock of outstanding debt in recent years. Now at $1.3
trillion, the student loan program rivals the Federal Housing
Administration's largest mortgage program in size. \2\
---------------------------------------------------------------------------
\1\ For more information about the history and expansion of the
Federal student loan program, see: Jason D. Delisle, Private in Name
Only: Lessons from the Defunct Student Loan Program, American
Enterprise Institute, February 2017, www.aei.org/wp-content/uploads/
2017/02/Private-in-Name-Only.pdf.
\2\ Board of Governors of the Federal Reserve System, ``Mortgage
Debt Outstanding,'' March 2017, www.Federalreserve.gov/econresdata/
releases/mortoutstand/current.htm.
---------------------------------------------------------------------------
Given the size and scope of the loan program, it is important to
understand that the loan program imposes costs on taxpayers. Such costs
speak directly to the need for policies that guard against fraud,
waste, and abuse along with policies that provide information about
loan performance. Borrowers who attend poor quality or overpriced
programs will struggle to repay their debt and in turn impose losses to
taxpayers.
Loan-Based Accountability Policies and their Limitations
In the early 1990's, Congress enacted its first loan-based
accountability policy: the cohort default rate. The cohort default rate
measures the share of an institution's former students who borrow
Federal loans and default within 3 years of entering repayment. \3\
Institutions with high default rates lose eligibility for Federal
student aid programs because lawmakers saw high default rates as a
proxy for low-quality institutions of higher education.
---------------------------------------------------------------------------
\3\ To be counted as a default in the cohort default rate, a
borrower must miss making a payment for 360 days or more. For more
information, see Cornell Law School, ``Calculating and Applying Cohort
Default Rates,'' www.law.cornell.edu/cfr/text/34/668.202.
---------------------------------------------------------------------------
The Obama administration's ``gainful employment'' regulations again
sought to use loans as a proxy for value and quality, but in a
different way. The initially proposed rule included a measure of
whether borrowers who completed a particular program paid down
principal on their student loans. The final rule does not include that
measure but instead uses the amount of debt a student takes on
(relative to his earnings) to gauge eligibility for Federal aid by
program.
Then there are proposals for a third loan-based accountability
measure: risk sharing. These proposals--advanced by think tanks,
researchers, advocates, and some lawmakers--would require institutions
that pass the other measures of accountability to pay penalties to the
Federal Government commensurate with the amount of loans that perform
poorly. \4\
---------------------------------------------------------------------------
\4\ Ben Miller and Beth Akers, ``Designing Higher Education Risk-
Sharing Proposals,'' Center for American Progress, May 22, 2017,
www.americanprogress.org/issues/education-postsecondary/reports/2017/
05/22/432654/designinghigher-education-risk-sharing-proposals/.
---------------------------------------------------------------------------
Despite the sound rationale for loan-based accountability policies,
these measures still have limitations. By design they exclude all
students in programs or institutions who do not borrow. Programs and
institutions that mainly use Federal Pell Grants, and few loans, are
also excluded from the accountability measure. This implies that there
is not a need for accountability measures for grant aid or for students
who pay out of pocket. If the accountability measure is supposed to
prevent taxpayer resources from supporting overpriced and low quality
programs--or protect consumers from squandering their time and limited
Federal aid--then focusing accountability only on loan performance
falls short of that goal.
Even the loan-based metrics themselves are imprecise. While
defaulting on a student loan is clearly a bad outcome, policymakers
should be careful when interpreting that event as a signal that
borrowers' debts are unaffordable, that their earnings are low, or
both. Data suggest that about one in seven borrowers with incomes
between $60,000 and $70,000 default within 4 years of entering
repayment. \5\ That is a high default rate for borrowers who do not
appear to have low incomes.
---------------------------------------------------------------------------
\5\ Constantine Yannelis, ``Strategic Default on Student Loans''
(working paper, New York University, New York City, 2016), http://
faculty.chicagobooth.edu/workshops/financelunch/past/pdf/Strategic
percent20Default.pdf.
---------------------------------------------------------------------------
While those figures suggest default rates may overstate what the
accountability metric seeks to measure, benefits in the loan program
that allow borrowers to postpone payment and avoid default can
understate the extent to which an institution's students are
struggling. Recent research shows that lifetime loan default rates are
much higher than the rates captured in the 3-year cohort default rate
window. \6\
---------------------------------------------------------------------------
\6\ Jennie H. Woo et al. ``Repayment of Student Loans as of 2015
Among 1995--96 and 2003--04 First-Time Beginning Students,'' (National
Center for Education Statistics, 2017), https://nces.ed.gov/pubs2018/
2018410.pdf.
---------------------------------------------------------------------------
Another limitation comes from the income-based repayment programs.
Borrowers can enroll in income-based repayment options that allow them
to pay down debt slowly. In some cases they may never have to make
payments on the loan if their incomes are low enough. These borrowers
would be avoiding default despite making no payments. Meanwhile, the
highest default rates occur among borrowers with post-enrollment
incomes between $10,000 and $20,000--income levels at which most
borrowers would qualify for $0 payments under income-based repayment if
they enrolled. \7\ Using loan repayment rates like the Obama
administration's original gainful employment regulation might be more
precise for overcoming that limitation, but that metric entails other
limitations. For example, educational programs that lead to careers in
public service may be more likely to exhibit low repayment rates as
their graduates may be more likely to enroll in income-based repayment
plans. Some policymakers, however, may not consider those educational
programs to be of poor quality or low value despite the low repayment
rates.
---------------------------------------------------------------------------
\7\ Ibid., 36.
---------------------------------------------------------------------------
The Cost and Risks of Federal Student Loans
Keeping these limitations in mind, my testimony will now detail how
the loan program imposes costs and risks on taxpayers to illustrate why
accountability policies are necessary. While my discussion focuses on
costs, this is not to suggest that loan program is not valuable for
students and the economy as a whole. Generally, I believe a well-
designed Federal student loan program plays an important role in our
higher education system and is worth the budgetary costs.
However, my goal today is to focus on the cost side of that cost-
benefit analysis.
My testimony today examines the loan program by looking at four
categories of costs: loan defaults; Income-Based Repayment and loan
forgiveness programs; loan discharges for fraud and closed schools; and
last, comprehensive budget cost estimates for the entire loan program.
These categories are not mutually exclusive, but they provide a useful
framework for evaluating the major costs within the loan program. In
discussing costs in these categories I also dispute the erroneous view
that the government profits when borrowers default on their loans and
that it profits on the overall loan program. In my concluding remarks,
I offer some general principles that I believe should guide any reform
to accountability policies for Federal student aid.
The Cost of Student Loan Defaults
When borrowers default on their Federal student loans they impose
costs on taxpayers on average. Recent data have revealed that these
costs have been rising in recent years.
There are over eight million borrowers currently in default on
their loans and that number has increased sharply in recent years. In
2013, just over six million borrowers were in default. Based on my
calculation of Department of Education data, about one in five
borrowers whose loans have come due were in default at the end of 2017.
\8\ The Department of Education projects that 16.6 percent of loan
dollars issued in fiscal year 2018 will default at some point in their
repayment. But a default, which is defined in the program as 270 days
without an on-time payment (or 360 days for the cohort default rate
measure), is not necessarily a measure of loss to the government as is
often implied. \9\
---------------------------------------------------------------------------
\8\ Jason Delisle and Clare McCann, ``Who's Not Repaying Student
Loans? More People Than You Think,'' Forbes, September 26, 2014,
www.forbes.com/sites/jasondelisle/2014/09/26/whos-not-repaying-student-
loans-more-peoplethan-you-think/#51d8345e4c0c.
\9\ 20 USC 1085(l) defines a technical default as a 270-day period
over which a borrower fails to make a payment. This definition applies
for all uses of default except for cohort default rate, which is
defined as a 360-day period in 34 CFR 668.202(c)(1)(iv). For more
information, see Department of Education, ``Definition of Default for
Student Eligibility and Cohort Default Rate Calculations,'' February
25, 2011,https://ifap.ed.gov/eannouncements/
022511DefiDefaultEligiCDR.html and Cornell Law School, ``Calculating
and Applying Cohort Default Rates,'' www.law.cornell.edu/cfr/text/34/
668.202.
---------------------------------------------------------------------------
The Federal Government contracts with private collection agencies
to recover defaulted loans and has its own recovery techniques such as
wage garnishment and offsets of payments like tax refunds. While the
Department reports that these efforts allow it to recover most of the
money owed on defaulted loans, a significant amount is never recovered.
The Department's latest report puts its estimated recovery rate at just
76.9 percent of dollars in default (See Figure 1). \10\ That equates to
a cost to the government from defaults of $4 billion per year, or at
least $40 billion over the congressional 10-year budget window. The
recovery rates are in line with recovery rates for defaults on home
mortgages. \11\
---------------------------------------------------------------------------
\10\ Department of Education, Student Loan Overviews: Fiscal Year
2018 Budget Proposal,'' www..ed.gov/about/overview/budget/budget18/
justifications/q-sloverview.pdf.
\11\ Constantine Yannelis, ``Strategic Default on Student Loans''
(working paper, New York University, New York City, 2016), http://
faculty.chicagobooth.edu/workshops/financelunch/past/pdf/Strategic
percent20Default.pdf.
---------------------------------------------------------------------------
Figure 1: Student Loan Default and Recovery Rates, FY17 & FY18
Estimates
The most recent projected recovery rate reflects a significant
downward revision from the past years when the Department estimated
recoveries at 84.3 percent of defaulted dollars (see Figure 1). \12\
That changed caused the Department to effectively write down the value
of loans issued in the past that are still outstanding by $14.6
billion, as the Department put it, ``reflecting lower actual
collections on defaults.'' \13\
---------------------------------------------------------------------------
\12\ Department of Education, ``Student Loan Overviews: Fiscal
Year 2018 Budget Proposal,'' www..ed.gov/about/overview/budget/
budget18/justifications/q-sloverview.pdf.
\13\ US Department of Education, External Stakeholders Meeting on
December 7, 2017, PowerPoint presentation.
---------------------------------------------------------------------------
While the Department shows that defaults do indeed impose a cost on
taxpayers, some observers have erroneously claimed that the Federal
Government actually makes money when borrowers default. They claim that
the penalty fees and additional interest that borrowers accrue while in
default nets the government more money than if the borrower repaid on
time without penalty. While some budget documents do appear to support
the ``government profits on defaults'' view by showing a recovery rate
that exceeds 100 percent, these estimates do not net out the fees the
government must pay to collection agencies to recover the loans and do
not factor in the time-value of money, effectively valuing a dollar
recovered 20 years from now as worth the same as a dollar collected
today. \14\ Once this misleading accounting is corrected and recovery
rates are adjusted for costs, the Department reports the 76.9 percent
recovery rate stated above, meaning a default costs taxpayers 23.1
percent of all loan dollars that go into default. \15\
---------------------------------------------------------------------------
\14\ Office of Management and Budget, ``Federal Credit Supplement:
Budget of the U.S. Government Fiscal Year 2018,'' www.govinfo.gov/
content/pkg/BUDGET-2018-FCS/pdf/BUDGET-2018-FCS.pdf.
\15\ Even that rate may be overstated as the Congressional Budget
Office reported in a 2007 working paper. When discounting the recovery
rates for not just the time-value of money, but also the market risk
inherent in the cash flow, recovery rates drop to 50 percent. For more
information, see Congressional Budget Office, ``Guaranteed Versus
Direct Lending: The Case of Student Loans,'' June 2007, www.cbo.gov/
sites/default/files/110th-congress-2007-2008/workingpaper/2007--09--
studentloans--0.pdf.
---------------------------------------------------------------------------
Income-Based Repayment and Loan Forgiveness
Another category of costs and risks in the loan program are the
losses taxpayers face when students repay their loans through the
Income-Based Repayment (IBR) program. Under the most recent version of
IBR, which Congress and the Obama administration enacted in 2010 and
made available to all new borrowers beginning in July 2014, borrowers
pay 10 percent of their discretionary income toward the loan. After a
20-year repayment period, any remaining balance is forgiven. Borrowers
who complete 10 cumulative years of payments in any public sector or
most nonprofit jobs qualify for the Public Service Loan Forgiveness
(PSLF) program and have their debts forgiven at that point, 10 years
earlier than other borrowers using IBR. \16\
---------------------------------------------------------------------------
\16\ Under current law, borrowers must pay Federal income taxes on
the amount forgiven under the 20-year forgiveness benefit (not PSLF),
but its political unpopularity makes it uncertain that this provision
will go into effect, so the offsetting effects of this provision are
ignored here.
---------------------------------------------------------------------------
IBR can provide a large benefit to borrowers at substantial cost to
the government. The Department projects that many borrowers who use IBR
will not repay their loans in full and thus receive forgiveness either
through PSLF or after 20 years of payments for those working in the
for-profit sector. The Department estimates that it costs taxpayers $27
for every $100 of loans a borrower repays through IBR due to forgiven
interest and principal. \17\ The Department also estimates that of the
2018 cohort of loans, $47 billion will be repaid in IBR.
---------------------------------------------------------------------------
\17\ White House, Department of Education Budget Fiscal Year 2018,
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/
fy2018/edu.pdf.
---------------------------------------------------------------------------
The benefits that the program provides are not limited to borrowers
with perpetually low incomes. The changes that the Obama administration
made to the program in 2010--reducing the share of income on which
payments are based from 15 percent to 10 percent and reducing the time
to loan forgiveness from 25 to 20 years--allow borrowers with higher
incomes to benefit if they borrow large sums to finance a graduate
education. \18\ Indeed, the Department recently estimated that the
majority of debt repaid under IBR will be for graduate degrees and
among those borrowers, most will earn over $100,000 on average during
repayment. \19\
---------------------------------------------------------------------------
\18\ Jason Delisle and Alex Holt, ``Winners and Losers in
President Trump's Student Loan Plan,'' Brookings Institution, August 3,
2017,www.brookings.edu/research/winners-and-losers-in-president-trumps-
student-loan-plan/; Jason Delisle and Alex Holt, ``A Student Loan Blind
Spot,'' Washington Post, February 20, 2015, www.washingtonpost.com/
opinions/the-22-billion-student-loan-blind-spot/2015/02/20/e3413e82-
b6f5-11e4-aa05-1ce812b3fdd2--story.html'utm--term=.0d573827272a.
\19\ Department of Education, ``Comparison of Total Originations
to the Net Present Value of Payments in Each IDR Repayment Plan: All
Borrowers Expected to Enter IDR Repayment in 2016,'' www2.ed.gov/about/
overview/budget/budget17/idrtables.pdf.
---------------------------------------------------------------------------
An accountability measure that looks at defaults alone is unlikely
to capture the costs to taxpayers associated with IBR as these
borrowers can generate costs without defaulting. An accountability
measure that includes how quickly borrowers pay down principal, like
the metric the Obama administration proposed, would identify
institutions or education programs where large shares of former
students both use IBR and have earnings that are low relative to their
loan balances. For many borrowers, using IBR is not a negative outcome
per se. What matters for accountability purposes is whether students
from a particular program or school use IBR and pay down their loans at
an unusually slow rate due to low incomes. That means IBR is not an
impediment to using a loan repayment rate for accountability purposes,
but it does need to be factored into what the minimum level for
repayment rate should be.
Borrower Defense to Repayment and Closed School Discharges
A third category of costs in addition to losses from default and
IBR are loan discharges in the case of fraud and school closures. In
these cases, lax accountability policies can expose taxpayers to losses
because they do not sufficiently guard against fraud or screen out
institutions likely to close for some other reason.
Under current law, a Federal student loan borrower who believes
that he was deceived by an ``act or omission'' of his institution may
assert a ``defense to repayment,'' which would entitle that borrower to
full or partial relief from his student loan obligations, potentially
including amounts already paid on the loan. \20\ For most of its
existence, borrower defense was a little-used provision. That changed
with the 2015 collapse of Corinthian Colleges when tens of thousands of
former Corinthian students had loans discharged, with a cost of $247
million as of October 2016. \21\
---------------------------------------------------------------------------
\20\ Cornell Law School, ``20 USC 1087e--Terms and Conditions of
Loans,'' www.law.cornell.edu/uscode/text/20/1087e.
\21\ Department of Education, ``U.S. Department of Education
Announces Final Regulations to Protect Students and Taxpayers from
Predatory Institutions,'' October 28, 2016, www.ed.gov/news/press-
releases/us-department-education-announces-final-regulations-protect-
students-and-taxpayers-predatory-institutions.
---------------------------------------------------------------------------
In 2016, the Obama administration issued a regulation to clarify
the standard for borrower defense. \22\ This rule expanded the range of
actions by an institution that could justify a loan discharge,
including ``statements with a likelihood or tendency to mislead under
the circumstances.'' Secretary of Education Betsy DeVos postponed the
regulations and proposed a new set of rules that would create a
stricter standard (relative to the Obama rules) for discharges. \23\
---------------------------------------------------------------------------
\22\ Department of Education, ``Student Assistance General
Provisions, Final Regulations,'' 2016, www2.ed.gov/policy/highered/reg/
hearulemaking/2016/bd-unofficialfinalregs-102716.pdf.
\23\ Department of Education, ``Borrower Defense and Financial
Responsibility,'' 2017,www2.ed.gov/policy/highered/reg/hearulemaking/
2017/borrowerdefense.html;; Department of Education,``Secretary DeVos
Announces Regulatory Reset to Protect Students, Taxpayers, Higher Ed
Institutions,'' June 14, 2017, www.ed.gov/news/press-releases/
secretary-devos-announces-regulatory-reset-protect-students-taxpayers-
higher-ed-institutions.
---------------------------------------------------------------------------
Estimating the future cost to taxpayers of borrower defense
discharges is difficult, as the discharges are a recent phenomenon. In
late 2017, the Department estimated that an increased number of
borrower defense discharges on outstanding student loans would cost
taxpayers $5.1 billion. \24\ The Obama administration estimated that
its version of the borrower defense rules would cost taxpayers $14.9
billion over 10 years, though this estimate is highly uncertain. \25\
As of October 2017, over 135,000 student borrowers had applied for loan
relief under borrower defense. \26\
---------------------------------------------------------------------------
\24\ US Department of Education, External Stakeholders Meeting on
December 7, 2017, PowerPoint presentation.
\25\ Department of Education, ``Student Assistance General
Provisions, Final Regulations,'' 2016, www2.ed.gov/policy/highered/reg/
hearulemaking/2016/bd-unofficialfinalregs-102716.pdf
\26\ Department of Education, ``Borrower Defense and Financial
Responsibility,'' 2017,www2.ed.gov/policy/highered/reg/hearulemaking/
2017/borrowerdefense.html.
---------------------------------------------------------------------------
The closure of an institution of higher education can also allow
students to have their Federal student loans discharged. The Secretary
of Education may cancel loans for borrowers who were enrolled in an
institution at the time of its closure, or withdrew fewer than 120 days
before the institution closed. \27\ If a student completes his degree
program or successfully transfers his credits to another institution,
he is not eligible for a closed school discharge.
---------------------------------------------------------------------------
\27\ Cornell Law School, ``34 CFR 685.214 Closed School
Discharge,'' https://www.law.cornell.edu/cfr/text/34/685.214.
---------------------------------------------------------------------------
While school closures are rare, their number has increased in
recent years. During the 2015-16 academic year, 66 degree-granting
institutions closed their doors, up from just 11 in 2005-06. \28\ In
addition, the closure of one large chain of institutions can result in
significant costs to taxpayers. When Corinthian Colleges closed in
2015, it left its 56,000 students potentially eligible for a closed
school discharge; those students accounted for 64 percent of all
students in schools which closed that year. \29\ Another major chain,
ITT Technical Institute, closed in 2016 and will generate $461 million
in closed school discharges according to a court filing in March 2017.
\30\ Estimating how much taxpayers will lose on future closed school
discharges, however, is difficult and not included as a line item in
the Federal budget.
---------------------------------------------------------------------------
\28\ National Center for Education Statistics, ``Table 317.50:
Degree-granting Postsecondary Institutions That Have Closed Their
Doors, by Control and Level of Institution: 1969-70 through 2015-16,''
https://nces.ed.gov/programs/digest/d16/tables/dt16--
317.50.asp'current=yes.
\29\ Government Accountability Office, ``Education Should Address
Oversight and Communications Gaps in Its Monitoring of the Financial
Condition of Schools,'' August 2017, www.gao.gov/assets/690/686709.pdf.
\30\ Jillian Berman, ``Taxpayers Could End Up Paying $460 Million
Because of ITT Tech's Collapse,'' MarketWatch, March 20, 2017,
www.marketwatch.com/story/taxpayers-could-end-up-paying-460-million-
because-of-itt-techs-collapse-2017-03-20.
---------------------------------------------------------------------------
Overall Budget Cost of the Loan Program
So far my testimony has discussed different types of costs in the
Federal loan program to illustrate why accountability policies are
necessary. Another case for accountability policies in the loan program
is that the program as a whole imposes costs taxpayers. It should
therefore include policies to limit those costs and prevent limited
resources from being wasted.
Some observers have argued that the Federal loan program does not
impose budgetary costs on the government and instead earns a profit
from lending. Like the earlier case of default costs, this view is also
based on misleading accounting.
While the Congressional Budget Office publishes estimates each year
showing that the loan program appears to earn a profit for the
government, the agency has criticized the accounting rules--written by
Congress in the Federal Credit Reform Act of 1990 (FCRA)--that require
it to publish such figures. According to those rules, Federal student
loans issued over the coming 10 years will earn the government $28
billion. CBO argues that the accounting rules that require it to
produce that estimate, ``do not provide a comprehensive measure of what
Federal credit programs actually cost the government and, by extension,
taxpayers,'' and the agency has suggested a more comprehensive measure
called fair-value accounting. \31\ Under that method, CBO reports that
the loan program will cost taxpayers $183 billion over the next 10
years. Fair-value accounting, CBO explains, includes a more
comprehensive measure of risk that effectively assigns a cost to the
loans because the interest rate the government charges borrowers is not
enough to fully compensate for the risk of losses from default and loan
forgiveness.
---------------------------------------------------------------------------
\31\ Congressional Budget Office, ``Fair-Value Accounting for
Federal Credit Programs,'' Issue Brief March 2012, www.cbo.gov/sites/
default/files/112th-congress-2011-2012/reports/03-05-
fairvaluebrief.pdf.
---------------------------------------------------------------------------
Guiding Principles for Federal Student Aid Accountability Policies
My testimony today has detailed the ways in which the Federal
student loan program entails financial risk for taxpayers and results
in budgetary costs. Those risks and costs are the underlying reason why
accountability policies are an essential feature of the loan program.
Low-quality education programs, overpriced courses, and sham
credentials exacerbate costs in the loan program by driving up
defaults, loan forgiveness, and discharges. This is not to suggest,
however, that the current set of accountability measures are optimal.
To conclude, I will suggest several guiding principles that I believe
will lead policymakers to adopt fair, consistent, and efficient
accountability policies for Federal student aid programs.
Go Beyond Loans
The introduction of my testimony already made the case for
accountability measures that go beyond student loans. At a minimum,
accountability measurements should include Federal grant aid, and
possibly even gross tuition prices that cohorts of students paid. They
might also include Federal tuition tax credits as another source of
aid. After all, current policies use loans as a proxy to gauge both
Federal funding and price. If policymakers want to measure those things
for accountability purposes, there are more comprehensive ways to go
about it.
Consider that the Federal Pell Grant program, which disburses
approximately $28 billion in aid annually, has far fewer accountability
measures attached to it than the loan program. \32\ Many in the policy
community advocate for further accountability measures based on loan
payments (e.g., risk sharing and repayment rates) but ignore the Pell
Grant program. An accountability measure could be based on a ``grant-
to-income'' ratio or a ``total-aid-to-income'' ratio like the one that
exists for loans under the gainful employment regulation. Furthermore,
institutions of higher education can already opt out of the loan
program to avoid its accountability measures while maintaining access
to Pell Grants and their relatively lax quality assurance policies.
\33\
---------------------------------------------------------------------------
\32\ Department of Education, ``Fiscal Year 2018 Budget Summary
and Background Information,'' https://www2.ed.gov/about/overview/
budget/budget18/summary/18summary.pdf.
\33\ Deborah Frankle Cochrane and Robert Shireman, ``Denied:
Community College Students Lack Access to Affordable Loans,'' The
Institute for College Access and Success, April 17, 2008, https://
ticas.org/sites/default/files/pub--files/denied.pdf.
---------------------------------------------------------------------------
Low-tuition institutions, such as community colleges, that still
participate in the loan program but whose students infrequently borrow
also skirt accountability measures that rely solely on loan repayment
measures. Their students' small loan balances may make it appear as if
the institutions provide good value, but that may not be the case if
former students' earnings are measured against Pell Grant aid or total
tuition.
Of course, loans offer a convenient but crude proxy for gauging a
student's post enrollment earnings in a way that grants or out-of-
pocket tuition payments can never capture. Grants and out-of-pocket
payments do not generate a repayment cash-flow like loans, so there is
no way to infer whether a student has sufficient earnings. Policymakers
could, however, measure earnings more directly by querying payroll tax
information as they have done under the Obama administration's gainful
employment regulation.
Apply Accountability Standards Consistently to All Institutions or
Programs
There are a number of places where statute and regulation impose
different accountability standards on institutions of higher education
depending on whether an institution is for-profit. Policymakers are
rightly concerned about taxpayer and consumer protections for Federal
student aid spent at those institutions. But bad student outcomes are
no less worrisome if they occur at public or private non-profit
institutions.
For example, there are likely many graduate degree programs at
private non-profit and public universities whose graduates have low
earnings or low repayment rates relative to the price students paid and
the Federal loans they borrowed. Yet the gainful employment statute
(and therefore the regulations) does not apply to degree programs at
such institutions, only those at for-profit institutions. Graduate
certificate programs, however, are treated equally across institution
types which resulted in a revealing case in 2016 when a Harvard
University graduate certificate in theater and drama performance ran
afoul of the gainful employment regulation's debt-to-income test. Had
this credential been a degree and not a certificate it would have
escaped the accountability measure because Harvard is a non-profit
institution. \34\ (Harvard shuttered the program after the finding.)
---------------------------------------------------------------------------
\34\ Kevin Carey, ``Programs That Are Predatory: It's Not Just at
For-Profit Colleges,'' New York Times, January 13, 2017,
www.nytimes.com/2017/01/13/upshot/harvard-too-obamas-final-push-to-
catch-predatory-colleges-is-revealing.html.
---------------------------------------------------------------------------
This case illustrates why it makes sense to treat institutions and
programs consistently. If former students end up with high debt and
relatively low earnings, the type of institution or credential should
not have a bearing on whether accountability measures to protect
taxpayers and consumers should apply.
Of course, the Harvard example is one program and one school,
albeit a high-quality prestigious one. A more comprehensive analysis
shows weak loan performance across institution types. For example, one
recent study found that 74 percent of students who attended a for-
profit institution owed more on their loans 2 years after beginning
repayment in 2012 than when they entered repayment. \35\ That is
clearly a troubling statistic. These students either defaulted or
entered into a forbearance to postpone payments on their debts. Yet
public and private nonprofit 2-year institutions performed nearly as
bad. Among their students, 64 percent owed more on their loans after
the 2-year mark.
---------------------------------------------------------------------------
\35\ Adam Looney and Constantine Yannelis, ``A Crisis in Student
Loans? How Changes in the Characteristics of Borrowers and in the
Institutions They Attend Contributed to Rising Loan Defaults,''
Brookings Institute, September 2015, www.brookings.edu/wp-content/
uploads/2015/09/LooneyTextFall15BPEA.pdf.
---------------------------------------------------------------------------
Resist the Urge for Central Planning in Accountability Policies--Set a
floor Instead
There is a temptation in designing accountability measures to
overreach and use Federal policies as a central planning system. Under
this view, accountability measures should channel Federal funds to the
``best'' programs or the ``most in-demand credentials'' and cut them
off for others. The Obama administration's abandoned attempt to rate
institutions of higher education falls within this type of policy.
Another is a plan in Kentucky to provide free short-term credentials at
public community colleges, but only in fields approved by policymakers.
\36\ These fields are supposed to be in high demand in the labor
market, except policymakers are not likely to be good judges of that
criteria and will surely make politically driven decisions about which
credential to support. The same dynamic can be expected to occur at the
Federal level, which is why policymakers should strive to leave such
decisions to the market. Instead, accountability measures should strive
to set a reasonable floor that guards against waste and fraud.
---------------------------------------------------------------------------
\36\ Preston Cooper, ``Why `Free College Lite' Doesn't Make Sense
for Kentucky,'' Forbes, April 19, 2017, www.forbes.com/sites/
prestoncooper2/2017/04/19/why-free-college-lite-doesnt-make-sense-for-
kentucky/#39e0650775b0.
---------------------------------------------------------------------------
Data and Information Alone Can be an Effective Accountability Policy.
Finally, policymakers should consider that information can be an
effective accountability tool--even if it does not include triggers for
punitive actions. Consumer information plays a vital role in a smooth
functioning market. Institutions and programs that offer low returns on
investment--but not low enough to trigger accountability measures--
would be disciplined by market forces. The role for accountability
policy here is that unlike a publicly traded company that must disclose
its own detailed financial statements each quarter, universities cannot
be made to disclose information on student outcomes because they have
no way to reliably collect this information. The Federal Government
can, however, collect that information through payroll tax and other
data collection efforts. The Department of Education is making some of
this information available, but could go further. \37\
---------------------------------------------------------------------------
\37\ Department of Education, ``College Scorecard,'' 2018, https:/
/collegescorecard.ed.gov/.
---------------------------------------------------------------------------
To offer one specific example, the College Scorecard data could be
expanded to include graduate schools and programs. Those data are
currently excluded. Meanwhile, in recent years the Federal Government
has greatly expanded financial aid to graduate students by eliminating
borrowing limits in the Federal loan program and offering more generous
income-based repayment plans. That likely has contributed to the large
increase in borrowing among graduate students. \38\ Emerging evidence
shows that graduate degrees have a wide range of returns in the labor
market, and most alarmingly, some degrees lead to earnings no higher
than those for associate degrees. \39\ When those degrees are financed
with Federal loans and generous income-based repayment plans that
include loan forgiveness, policymakers have an interest in exposing and
mitigating the risk of taxpayer losses that stem from such outcomes.
---------------------------------------------------------------------------
\38\ Jason Delisle, ``The Graduate Student Debt Review,'' New
America, 2014, https://static.newamerica.org/attachments/750-the-
graduate-student-debt-review/GradStudentDebtReview-Delisle-Final.pdf.
\39\ Mark Schneider and Jorge Klor de Alva, ``The Master's as the
New Bachelor's Degree: In Search of the Labor Market Payoff,'' American
Enterprise Institute, January 2018, www.aei.org/wp-content/uploads/
2018/01/The-Masters-as-the-New-Bachelors-Degree.pdf.
---------------------------------------------------------------------------
That concludes my testimony today and I look forward to answering
any questions that you may have about Federal student loans and
accountability policies.
______
[summary statement of jason d. delisle]
The Federal role in higher-education lending has grown ever since
lawmakers enacted the first loan program under the National Defense
Education Act of 1958. This expansion, along with rising college costs
and increasing student enrollments, has led to a rapid increase in the
stock of outstanding debt in recent years. Now at $1.3 trillion, the
student loan program rivals the Federal Housing Administration's
largest mortgage program in size.
Given the size and scope of the loan program, it is important to
understand that the loan program imposes costs on taxpayers. Such costs
speak directly to the need for policies that guard against fraud,
waste, and abuse along with policies that provide information about
loan performance. Borrowers who attend poor quality or overpriced
programs will struggle to repay their debt and in turn impose losses to
taxpayers.
In that regard, my testimony details how the loan program imposes
costs and risks on taxpayers to illustrate why accountability policies
are necessary. While my discussion focuses on costs, this is not to
suggest that loan program is not valuable for students and the economy
as a whole. Generally, I believe a well-designed Federal student loan
program plays an important role in our higher education system and is
worth the budgetary costs. However, my goal today is to focus on the
cost side of that cost-benefit analysis.
My testimony today examines the loan program by looking at four
categories of costs: loan defaults; Income-Based Repayment and loan
forgiveness programs; loan discharges for fraud and closed schools; and
last, comprehensive budget cost estimates for the entire loan program.
These categories are not mutually exclusive, but they provide a useful
framework for evaluating the major costs within the loan program. In
discussing costs in these categories I also dispute the erroneous view
that the government profits when borrowers default on their loans and
that it profits on the overall loan program. In my concluding remarks,
I offer some general principles that I believe should guide any reform
to accountability policies for Federal student aid.
______
The Chairman. Thank you, Mr. Delisle.
Mr. Miller, welcome.
STATEMENT OF BEN MILLER, SENIOR DIRECTOR, POSTSECONDARY
EDUCATION, CENTER FOR AMERICAN PROGRESS, WASHINGTON, DC
Mr. Miller. Good morning, Chairman Alexander, Ranking
Member Murray, and other Members of the Committee. Thank you
for the opportunity to testify today.
Federal student aid is a deal between taxpayers, students,
and institutions. When students don't keep up their end of the
bargain, we hit them hard, wrecking their credit, docking their
wages, seizing their tax refunds or Social Security checks. But
there's almost no accountability when colleges break their
promises or repeatedly fail to educate students.
Yes, there are thousands of institutions that deliver on
the American Dream by moving students into the middle class.
But our current accountability system does not do enough for
students traditionally underserved by post-secondary education.
One million borrowers default on their Federal direct student
loans each year. Half of African American borrowers default on
their loans within 12 years of entering college. Nearly 90
percent of defaulters also received a Pell Grant at some time.
Poor outcomes cost taxpayers, too. We invest billions in
schools that repeatedly fail to educate most of their students.
Our economy suffers from the lost earnings potential of
students who did not receive the knowledge and skills needed to
succeed in the workplace.
The Department of Education's main accountability metric is
the cohort default rate. Yes, default is a horrible outcome,
but this measure is little more than a finger wag. Just 10
schools were at risk of losing Federal aid last year for high
default rates; 99.9 percent of defaulters attended schools that
have little to fear from this measure.
Repayment rates are potentially a stronger and more
aspirational accountability measure. They send a message that
we want our borrowers to repay successfully, not just avoid the
worst possible outcome.
But we still must figure out the proper way to define and
use repayment rates. For instance, there's no agreement on what
constitutes successful repayment. The most common approach is
to say a borrower needs to pay at least $1 of their principal
balance within 3 years of entering repayment. We may be better
off judging whether or not borrowers are on track to repay
within 20 or 25 years. We also must define what repayment
standards schools should be held to.
These are tough issues that demand additional data that is
already held by the Department of Education to properly
understand the different effects of repayment rate regimes.
But Congress must also understand that repayment rates are
just one component of making Federal accountability work. A
reauthorization of the Higher Education Act must establish a
Federal accountability system that aligns the interests of
students, schools, and taxpayers.
That starts with using multiple accountability measures and
looking at results by racial, ethnic, and socioeconomic
subgroups. Using just one indicator is insufficient because it
is too easy to game. And we must look at outcomes through an
equity lens in order to identify unacceptable performance gaps
and ensure our higher education system is truly a ladder of
opportunity.
There's more to accountability than just outcomes, though.
We also need stronger gatekeeping to keep lousy actors out of
the aid programs and ongoing guardrails to keep schools from
breaking bad.
Recent history illustrates how insufficient our guardrails
are. In the late 1990's and early 2000's we had several for-
profit colleges that had good business models and decent
outcomes. But financial incentives encouraged them to grow too
big too fast, or they were bought by Wall Street-backed firms
that changed how they operated. It took years for us to see the
results of this, and it wasn't pretty. At their peak, private
for-profit colleges enrolled a little over 10 percent of
students but produced nearly half of defaulters. Stronger
guardrails should have discouraged hyper-growth or blocked
sales to questionable owners.
We also need more flexible consequences that go beyond
terminating financial aid for the worst performers. We need
stronger minimum bars for Federal student aid, but we also need
incentives to boost performance of schools with mediocre
results.
Accountability must also acknowledge the diversity of our
higher education system. While all colleges should be held
accountable for loan outcomes, we should not pretend that the
business models and incentives of a college backed by Wall
Street are the same as the local community college.
Finally, the rest of the higher education system must step
up. No one has kept up their end of the bargain around funding
or cost containment. States, the Federal Government, and
accreditors have played accountability hot potato for too long.
The result is too many states fail to provide proper oversight
of the colleges serving their students, and some accreditation
agencies turned a blind eye while places like Corinthian
Colleges and ITT Technical Institute faced a raft of lawsuits
and complaints.
It has been nearly a decade since Congress last
reauthorized the Higher Education Act. Since then, many
students have suffered from unaffordable loans and insufficient
educations. Millions more will be harmed going forward if we
don't get accountability right this time.
Thank you for the opportunity to testify, and I look
forward to answering any questions you may have.
[The prepared statement of Mr. Miller follows:]
prepared statement of ben miller
Chairman Alexander, Ranking Member Murray and other Members of the
Committee, thank you very much for the opportunity to testify today.
Oral remarks
Federal student aid is a deal between taxpayers, students, and
institutions. When students don't keep up their end of the bargain we
hit them hard--wrecking their credit, docking their wages, seizing
their tax refunds or Social Security checks. But there's almost no
accountability when colleges break their promises or repeatedly fail to
educate their students.
Yes, there are thousands of institutions that deliver on the
American dream by leading students into the middle class. But the
results of our current accountability system are grim, especially for
students traditionally underserved by postsecondary education. One
million borrowers default on their Federal Direct loans each year.
\1\alf of African American borrowers default on their loans within 12
years of entering college. \2\ Pell Grant recipients comprise nearly 90
percent of defaulters. \3\
---------------------------------------------------------------------------
\1\ Office of Federal Student Aid, ``Default Rates,'' available at
https://studentaid.ed.gov/sa/about/datacenter/student/default (last
accessed November 2017).
\2\ Ben Miller, ``New Federal Data Show a Student Loan Crisis For
African American Borrowers,'' Center for American Progress, October
2017, https://www.americanprogress.org/issues/educationpostsecondary/
news/2017/10/16/440711/new-Federal-data-show-student-loan-crisis-
african-americanborrowers/.
\3\ Ben Miller, ``Who are Student Loan Defaulters?'' Center for
American Progress, December 2017, https://www.americanprogress.org/
issues/education-postsecondary/reports/2017/12/14/444011/studentloan-
defaulters/.
---------------------------------------------------------------------------
Poor outcomes cost taxpayers too. We invest billions in schools
that repeatedly fail to educate most of their students. Our economy
suffers from the lost earnings potential of students who did not
receive the knowledge and skills needed to succeed in the workplace.
The Department of Education's main accountability metric is the
cohort default rate. Yes, default is a horrible outcome. But this
measure is little more than a finger wag. Just 10 schools risked losing
Federal aid last year for high default rates--99.9 percent of
defaulters attended schools that have little to fear from this measure.
\4\
---------------------------------------------------------------------------
\4\ Ben Miller, ``Improving Federal Accountability for Higher
Education,'' Center for American Progress, October 2017, https://
www.americanprogress.org/issues/educationpostsecondary/reports/2017/10/
24/440931/improving-Federal-accountability-for-higher-education/.
---------------------------------------------------------------------------
Repayment rates are potentially a stronger and more aspirational
accountability measure. They send a message that our loan system should
expect student success, not just avoid the worst possible outcome.
But we still have to figure out the proper way to define and use
repayment rates. For instance, there's no agreement on what constitutes
successful repayment. The most common approach is to say a borrower
needs to pay at least $1 of their principal balance by the end of 3
years. We may be better off judging if borrowers are on track to repay
within 20 or 25 years. We also must address issues around repayment
rate benchmarks and how to treat subsequent enrollment.
These are tough issues that demand additional data already held by
the Department of Education to understand the potential effects of
different repayment rate regimes.
Congress must also understand that repayment rates are just one
component of making Federal accountability work. A reauthorization of
the Higher Education Act must establish a Federal accountability system
that aligns the interests of students, schools, and taxpayers.
That starts with using multiple accountability measures and looking
at results by racial, ethnic, and socioeconomic subgroups. Using just
one indicator is insufficient because it is too easy for bad actors to
game. And we must look at outcomes through an equity lens to catch
unacceptable performance gaps and ensure our higher education system is
the ladder of opportunity it needs to be.
There's more to accountability than just outcomes, though. We need
stronger gatekeeping to keep lousy actors out of the aid programs and
ongoing guard rails to keep schools from breaking bad.
Recent history illustrates how insufficient our guardrails are. In
the late 1990's and early 2000's we had several for-profit colleges
that had good business models and decent outcomes. But financial
incentives encouraged them to grow too big or they were bought by Wall-
Street backed firms that altered how they operated. It took years for
us to see the change in outcomes, and it wasn't pretty. At their peak,
private for-profit colleges were a little over 10 percent of students
and nearly half of defaulters. Stronger guardrails should have
discouraged hyper growth or blocked sales to questionable owners.
We also need more flexible consequences that go beyond terminating
financial aid for the worst performers. We need stronger minimum bars
for receiving Federal aid. But we also need incentives to boost
performance of schools with mediocre results.
Accountability must also acknowledge the diversity of our higher
education system. While all colleges should be held accountable for
their loan outcomes, we should not pretend that the business model and
incentives of a college backed by Wall Street are the same as the local
community college.
Finally, the rest of the higher education system must step up. No
one has kept up their end of the bargain around funding or cost
containment. States, the Federal Government, and accreditors have
played accountability hot potato for too long. The result is too many
states fail to provide proper oversight of the colleges serving their
students, and some accreditation agencies turned a blind eye while
places like Corinthian Colleges and ITT Technical Institute faced rafts
of lawsuits and complaints.
It has been nearly a decade since Congress last reauthorized the
Higher Education Act. Since then, millions of students have suffered
from unaffordable loans and insufficient educations. Millions more will
be harmed going forward if we don't get accountability right this time.
Thank you again for the opportunity to testify and I look forward
to answering any questions you may have.
Additional comments on repayment rates
The case for and limitations of repayment rates
Currently, the Education Department's sole measure for judging
colleges' student loan outcomes is to look at the percentage of
borrowers who default within 3 years of entering repayment. \5\ Though
default is unquestionably the worst outcome for a loan borrower, it's
an insufficient measure for Federal loans, especially when tracked for
such a short timeframe. That's because Federal debts contain a host of
repayment options that allow borrowers to pause payments without going
delinquent. These tools can easily push defaults outside the 3-year
measurement window, making results appear overly rosy. For instance, a
Center for American Progress analysis found that of borrowers who
defaulted within 12 years of first entering college, only a slim
majority did so in the first 3 years after entering repayment. \6\
---------------------------------------------------------------------------
\5\ https://www..ed.gov/offices/OSFAP/defaultmanagement/cdr.html
\6\ Miller, ``Who are Student Loan Defaulters?''
---------------------------------------------------------------------------
Creating a repayment rate measure would not fix the potentially
insufficient measurement window, but such a rate would offer a broader
view of what it means to struggle with student debt. It would look at
whether borrowers make progress retiring their loans, rather than
avoiding default through deferment or forbearance--thus holding
colleges accountable if larger numbers of their borrowers appear to be
making few if any payments. Repayment rates can also identify colleges
where more borrowers may be relying on tools to pause payments because
they are facing economic hardships or unemployment--potential signs
their education was of insufficient quality.
Focusing on repayment, not just default, would also set a higher
performance bar for institutions. Meeting default rate requirements
simply entails pushing students to enter any status other than default.
By contrast, most suggested definitions of successful repayment require
borrowers to be making payments toward retiring their debt, or in some
cases using repayment options tied to their income.
Repayment rates, however, are a complicated measure that touch on
issues related to how students move through higher education and
repayment. Failing to understand these nuances can result in a
repayment measure that unfairly labels successful programs as failures.
To avoid that challenge, there are six policy choices that Congress
must consider as it weighs how to define and use repayment rates.
Policy Choice #1: What is successful repayment and how should it be
calculated?
While there is strong bipartisan interest in making repayment rates
an accountability metric, there is less agreement about what should
constitute successful repayment and how it should be calculated.
Different approaches to calculating a repayment rate would likely
produce wildly different results. Unfortunately, insufficient data from
the U.S. Department of Education make it impossible to tell exactly
what the effects of various calculations are. Before it implements any
proposed repayment rate, Congress should obtain detailed modeling data
to ensure it fully understands the ramifications of any calculation.
Defining successful repayment
To date there are two main proposals for how to define successful
repayment. The most recent comes from legislation introduced in the
U.S. House of Representatives to reauthorize the Higher Education Act.
It proposes that successful repayment means a borrower did not default,
is not in certain deferment statuses, and is not more than 90 days
delinquent at the end of the third fiscal year in repayment. \7\
Borrowers who have an in-school deferment or a military service
deferment at the time of measurement count as repayment successes.
---------------------------------------------------------------------------
\7\ Kristin Blagg, ``Large uncertainty under the PROSPER Act's
proposed student loan accountability metric,'' Urban Institute, January
18, 2018, https://www.urban.org/urban-wire/large-uncertainty-
underprosper-acts-proposed-student-loan-accountability-metric.
---------------------------------------------------------------------------
Though called a repayment rate, this measure is more a reflection
of an active repayment status or excused absence. It does not tell us
much about a borrower's long-term repayment trajectory. And by testing
for delinquency only at the end of the measurement window it allows a
college to get credit for a borrower that corrected their status only
days before being assessed.
The most commonly used definition of repayment rates lacks some of
the flaws in the House bill, but raises other issues. This definition
has appeared on both the College Scorecard and as part of the original
proposals from the Department of Education to define what it means to
provide training that leads to gainful employment in a recognized
occupation. It defines success as a borrower who has not defaulted and
repaid at least $1 of their original principal balance after 3 years in
repayment. This measure deems a borrower as a success if they simply
owe anything less than what they borrowed.
The challenge with this approach is a $1 reduction in principal
after three or more years in repayment is not evidence of a path toward
paying off a loan in any reasonable amount of time. For example, a
borrower who owes $10,000 with a 5 percent interest rate when they
enter repayment would have retired just over a quarter of what they
owed after 3 years in repayment on the standard 10-year plan. Even if
they are paying off the loan over 25 years, they should have reduced
their principal by almost 10 percent. \8\
---------------------------------------------------------------------------
\8\ Ben Miller, ``Do Income-Based Repayment Plans Really Ruin
Repayment Rates?'' New America, December 2013, https://web.archive.org/
web/20150405035404/www.edcentral.org/income-basedpayment-plans-really
ruin-repayment-rates/.
---------------------------------------------------------------------------
What Congress should do: Given these concerns, Congress should
strive for a more ambitious bar for what it means to achieve repayment
success. It should define success as meaning borrowers have not
defaulted and owe no more than what we would expect to still be
outstanding on their loan if they were to pay down the debt over a 25-
year period. What this tests for is whether it looks like borrowers are
going to pay off their loans within the longest timeframe afforded
prior to loan forgiveness. The goal is to ensure we do not issue too
many loans that appear to be headed toward eventual forgiveness.
Calculating repayment rates
The next issue is whether to calculate repayment rates based upon
students or dollars involved. Both have benefits and drawbacks.
Unfortunately, without better data available, it is difficult to know
which is the superior approach.
A student-based calculation treats all borrowers equally. This
formula defines a threshold for the percentage of students who attended
an institution or program who must have demonstrated successful
repayment within the desired number of years after entering repayment.
In the most common form of repayment rates, this has meant saying
programs or institutions must have at least 45 percent of their
borrowers repaying.
The main argument for a student-based approach is it ensures that
poor results of lower-debt dropouts do not get masked by successful
completers. Within a given program or institution students who
graduated tend to have higher debt levels than those who dropped out.
But dropouts are also more likely to struggle with their loans. A
student-based measure ensures a school will remain concerned about
dropouts because they can hurt its overall rate.
A dollar-based approach, by contrast, allows a sufficient number of
successes to cancel out failures. There are two ways to use a dollar-
based approach: to weight students or pooled. The weighted student
approach calculates the result for each student, but expresses the
result in terms of their loan balance. An example illustrates what this
means. Imagine a school had two borrowers who entered repayment, one
who owed $10,000 and another who owed $30,000.
The borrower who owes $30,000 repays while the other does not. In a
dollar-weighted formula the repayment rate is thus 75 percent ($30,000
divided by $40,000) because three-quarters of the loan dollars are held
by students who are repaying.
Using a student-weighted dollar approach is less desirable than a
student-based approach. Focusing on dollars instead of students lessens
the plight of dropouts. It is also less intelligible as a consumer
measure.
A pooled approach is the better option for judging repayment based
on dollars. This calculation treats all the loans issued to a given
institution or program as if they were one big loan, and then tests
whether the total amount is repaid. In other words, if the total
original principal balance of all loans at a school is $100,000, the
school would have to show that the cumulative remaining balance after
several years meet the bar for successful repayment.
The advantage of a pooled approach is there is no need to figure
out the threshold for repayment rates. The summed loan balance either
did or did not repay. This approach also gives schools credit for
students who pay down a lot because they can counterbalance other
balances that may have grown. Whether that's a desired goal or not
depends on how worried Congress is about the plight of low-balance
borrowers.
What Congress should do: Obtain data and modeling from the U.S.
Department of Education to understand the effects of different
repayment calculations. This should include asking for how results
might vary by income and race.
Policy Choice #2: What should be the repayment rate benchmark?
Congress also needs to determine thresholds for repayment rates.
Unfortunately, there is no widely accepted benchmark for a repayment
rate measure. Earlier iterations of the gainful employment regulation
suggested programs should face sanctions if 35 percent or fewer of
their borrowers repaid. A judge, however, ruled that the Education
Department did not properly justify that threshold. A House bill to
reauthorize the Higher Education Act suggested a threshold of 45
percent on a measure with a different definition.
The lack of accepted repayment rate benchmarks creates challenge
for its use. From a philosophical standpoint, the notion that having
fewer than half of borrowers successfully repay seems like an awfully
low bar. At the same time, there has not been enough research into the
repayment path of borrowers who do not repay. This makes it hard to
understand whether the bar for successful repayment is high enough that
setting such a seemingly low benchmark is acceptable.
What Congress should do: Obtain better data from the Education
Department to model the effects of different repayment rate benchmarks.
This should be supplemented by student-level analysis of how non-paying
borrowers experience repayment. For instance, this analysis should look
at whether borrowers missing the repayment test are simply payments
that are not large enough, are using deferments or forbearances, or
doing other things that explain why they come up short.
Policy Choice #3: How should repayment rates address subsequent
enrollment at another institution?
Any discussion of repayment rates needs to include a discussion
about how to treat students' subsequent enrollment at other
institutions. This is especially an issue for students who go to
graduate school, but also matters for those who transfer among
undergraduate institutions.
Students who acquire debt from multiple institutions create
complicate the repayment rate in two main ways: (1) balance growth due
to in-school deferment and (2) behavioral changes due to higher debt
levels.
When students enroll at another institution of higher education,
they get an in-school deferment, in which some loan types will continue
accumulating interest that is then added to their principal balance the
next time they enter repayment. This matters because a student who
enters repayment, then transfers or goes to graduate school, could
appear to fail a repayment test solely because they aren't paying
accumulating interest while enrolled again. Failing to account for
interest accumulation while enrolled at another institution can make
the original school's results seem unfairly negative for reasons
outside of its control.
This problem is likely a bigger deal with graduate school
enrollment than with transferring. That's because students who enter
graduate school most likely had a longer gap between enrollment than
someone who transfers. By taking time off between finishing their
undergraduate education before going to graduate school many of these
students enter repayment--establishing the initial balance for
measuring repayment--and then receive an in-school deferment where
their balance grows. By contrast, students who transfer are less likely
to have a large enough gap between enrollment to enter repayment. As a
result, their balance tracked for repayment rate purposes is more
likely to be determined after their enrollment in another institution.
Long-term repayment data from the Department of Education suggest
that in-school deferments may be contributing to students to owing more
than they originally borrowed. Of students who started school in 2003-
04, borrowed, and in 2015 owed more than they originally borrowed, 54
percent had used at least one in-school deferment. That's 12 percentage
points higher than individuals who owed less than they originally took
out but had not paid off their loan. \9\
---------------------------------------------------------------------------
\9\ National Center for Education Statistics, ``Datalab, Beginning
Postsecondary Students 2004-2009, Table ccabka13,'' available at
https://nces.ed.gov/datalab/ (last accessed January 2018).
---------------------------------------------------------------------------
The second issue with debt from multiple colleges is that a higher
total loan balance can affect repayment behavior. Imagine a student
starts at community college and borrows $5,000. They then go to a
public 4-year school and borrow another $20,000. That additional debt
burden may make them more likely to use income-driven repayment (IDR)
because they get a larger payment reduction, possibly resulting in them
not paying enough to retire the original debt at a speedy pace.
Alternatively, they may not be able to handle that total balance,
forcing them into a deferment or forbearance. Similarly, if a borrower
cannot afford the full payment on their loan balance, then partial
payments may not reduce the lower debt from the first school as much as
it otherwise would.
What legislators should do: Addressing the problem of debt from
multiple institutions requires distinct solutions for subsequent
student enrollment and the potential effects of having a greater loan
balance.
For the subsequent enrollment issue, institutions should be held
accountable for the balance owed upon entering repayment after the in-
school deferment. In other words, if a student borrows $10,000, enters
repayment, then goes back to school where the balance grows to $12,000,
that last amount should be the starting point for measuring whether a
borrower has reduced their original balance. This approach ensures that
the first school will not be held accountable for in-school interest
accumulation due to attendance at another institution.
Looking at a balance once a student leaves a second school also has
implications for what cohort a student should be placed in. Students
should only be measured for repayment purposes after it has been at
least 3 years since their last in-school deferment and subsequent grace
period. This means a student who is in repayment for 2 years and then
goes to graduate school gets placed into a later cohort that starts
after they enter repayment again. While this may seem more complicated
to administer, it's a necessary change to ensure that borrowers are
judged on a better measure of their balance upon entering default, and
then tracked for sufficient time to be fairly assessed on whether they
can repay.
Concerns about how greater debt balances affect repayment is best
addressed by assuming all payments get applied to debt from each
school. An example highlights how this would work. Assume a borrower
has $20,000 total, with $5,000 coming from one school and $15,000 from
another. Their monthly payment is $200, with $50 going to the $5,000
debt and the rest to the other loan balance. The repayment rate
calculation should act as if the entire $200 payment went to both sets
of loans. While this does result in double counting payments, it
ensures that neither school is potentially harmed by the presence of
debt from another institution.
Policy Choice #3: How should repayment rates address income-driven
repayment?
The income-driven repayment (IDR) plans present complexities for
repayment rates. These plans are a crucial safety net for borrowers
that must be preserved. They help borrowers avoid default on debts they
could not otherwise afford and give them an eventual path out from
under their loans. An IDR plan, however, is not a get-out-of-jail-free
card for institutions. Schools where large numbers of students avail
themselves of IDR plans may be providing educations that are too
expensive compared to their economic return.
Using IDR can alter a borrower's perceived repayment success in a
few ways. First, by offering borrowers payments below what they would
make on the standard 10-year plan, it is possible that a borrower may
be making all their required payments but still seeing their balance
grow due to interest accumulation or their principal balance not get
retired more slowly. However, it is important to understand that just
going on IDR does not guarantee a borrower will fail to cover their
interest payments. For example, a borrower who owes $10,000 must earn
about $32,500 to make payments on IDR akin to what they would on the
10-year standard plan. If they make more than about $23,500 then they
will still cover some of their accumulating interest. \10\
---------------------------------------------------------------------------
\10\ Miller, ``Does Income-Based Repayment Really Ruin Default
Rates?'
---------------------------------------------------------------------------
The timing lag of IDR payment calculations further complicates this
issue. In most cases, a borrower's payment for IDR purposes is based
upon their income from the calendar year for which they most recently
field taxes. In other words, a borrower applying for IDR today might
well be using 2016 income. This matters because students who go onto
IDR right away will likely have their payments based off of the lower
income they had in their last year of school, not their current
earnings. This likely results in lower payments for their first year in
IDR, which can affect overall interest accumulation.
It would be easy to label a borrower making IDR payments that do
not keep up with interest as a failure under a repayment rate test. But
this brings up the second challenging effect of IDR--these plans make
repayment progress non-linear. Many borrowers on IDR plans are still
expected to repay within a 20 year timeframe, by paying down a much
greater share of their loan balance within the final few years of
repayment. Consider, for example, a borrower who owes $6,000 with a 5
percent interest rate and starts making $16,000 in annual income on the
Revised Pay as You Earn plan. In their first few years of repayment
they will not keep up with interest growth. If their income grows at a
steady rate of 5 percent, they will start paying down principal in the
sixth year of repayment and pay off their loan entirely before
receiving forgiveness.
Unfortunately, there is no ideal solution to the treatment of IDR
plans in a repayment rate. Treating all borrowers in IDR as a success
creates a good incentive for institutions to push struggling borrowers
to sign up for these plans. While that is a good outcome for borrowers,
it would provide a way for institutions that charge too much or produce
insufficient return to avoid accountability under the repayment rate
measure. On the other hand, treating all borrowers who make
insufficient payments on IDR as a failure has its own shortcomings.
Some unknown share of these borrowers may actually be on an income
trajectory that eventually results in paying off their debts before
receiving forgiveness. Labeling them a failure would be potentially
unfair to institutions. Even an in-between solution has challenges. For
example, the first gainful employment rule included a provision that
allowed programs to count up to 3 percent of total loan balances using
IDR as a success. This acknowledges some usage of IDR is acceptable,
but excessive usage is not. But it also establishes a cliff effect
where an institution close to the tolerance has an incentive to
potentially counsel struggling borrowers away from IDR. It is also
unclear how this tolerance would be applied for borrowers who are on
IDR but are making repayment progress.
What Congress should do: Demand more data from the Department of
Education about the usage of IDR and how it might affect repayment
rates. This includes data on the percent of borrowers and loan dollars
using IDR by school or program, what percent of these individuals would
fail or pass various repayment rate tests, and how these results vary
based upon the measurement timeframe used.
Policy Choice #4: Should repayment rates be assessed at the program or
institutional level?
Evidence increasingly shows that on indicators like earnings, the
results across programs within a given institution may be as great or
greater than the differences observed across colleges. That suggests a
program-level approach to accountability may be a more fruitful
approach than looking only at an institution overall. It has the added
benefit of providing additional flexibility--an institution may very
well have exceptional and abysmal programs and a program-level approach
potentially holds the latter accountable while leaving the former
untouched.
Congress must grapple with two challenges if it wants to consider
program-level repayment rates: how to handle non-completion and whether
there is always a meaningful distinction between programs.
Non-completion
It is easy to know if a student dropped out from an institution.
However, what program they dropped out of may not be as clear. At more
traditional institutions that predominantly award bachelor's or
associate's degrees, a student may not declare a major or program until
after their first or second year. That means a student who drops out
before that point may not actually be tracked to a given program yet.
How these students get assigned for the purposes of repayment rate
accountability could have significant implications for whether a
program passes or fails.
The challenge of dropouts not tied to programs appears to be
particularly acute at community colleges. Approximately one-quarter of
community college students who owed more than they originally borrowed
within 12 years of entering school never declared a major or were not
in a degree program. \11\ This is a smaller issue at private for-profit
colleges, but their students still represent 10 percent of non-
repayers. How those students get distributed across programs could lead
to unexpected passage or failure of a repayment rate.
---------------------------------------------------------------------------
\11\ National Center for Education Statistics, ``Datalab,
Beginning Postsecondary Students 2004-2009, Table cgabkkc5,'' available
at https://nces.ed.gov/datalab/ (last accessed January 2018).
---------------------------------------------------------------------------
Simply forcing institutions to assign all students to a program may
not be a workable solution. Consider a student who indicates they wish
to pursue a specific program, then takes four courses their first term,
each in a different program, drops out, and does not repay. Is it fair
to attribute the failure to that program when it could in theory be
applied to any of the other three?
While it is well established that outcomes vary among graduates of
different programs, we do not know if that is also the case for
dropouts. The table below shows the percentage of borrowers who started
at public colleges and who either owed more than they originally
borrowed or defaulted within 12 years of entering college. It shows
that the results by program dropouts are relatively similar. This
suggests that the important distinctions at the program level may be
best considered for graduates only.
Share of public college dropouts who owed more than 100% of their
original balance or defaulted within 12 years of entering school, by
program
Owed Over 100
percent Defaulted
Undeclared or not in a degree 44 35
program
Humanities 34 39
Social/behavioral sciences 44 43
Life sciences 38 39
Computer/information science 31 41
Engineering/engineering technologies 41 47
Education 36 27
Business/management 48 39
Health 36 42
Vocational/technical 29 42
Other technical/professional 38 45
National Center for Education Statistics, ``Datalab, Beginning
Postsecondary Students 2004-2009, Table baabknacc and baabkn1c,''
available at https://nces.ed.gov/datalab/ (last accessed January 2018).
There is no clean fix for this issue. One approach could be to
treat institutions that require program declaration upon entry
differently from those who do not. In other words, a vocational or
graduate institution that has little overlap across programs would use
a program-level approach, while other schools would be judged
institutionally. This adds complexity and could create confusion about
who is judged in which manner.
Alternatively, Congress could decide to run repayment tests on
graduates at the program level and judge institutions overall on
dropout repayment outcomes. In general, program-level accountability is
better suited to looking at graduates because they are a more clearly
defined group and it is more reasonable to expect that the outcomes for
someone who finished different types of programs might vary more than
the results for dropouts. If Congress takes this approach, it would
need to set a higher repayment bar since graduates are more likely to
succeed in general. This approach creates challenging accountability
questions. How should Congress interpret an institution where its
dropouts overall fare poorly but its graduates do well? That would lead
into questions of not just repayment success but also acceptable
completion rates.
What Congress should do: Request greater data from the Department
of Education to allow for an understanding of how repayment outcomes
vary by completers versus non-completers and whether the Education
Department can track non-completion by program.
Program distinction
The point of program-level accountability is to assess where
Congress believes outcomes may be so different across majors that it is
unfair to lump results together. This approach makes a great deal of
sense for career-focused programs that are training students to do very
specific and disparate jobs with different salary prospects.
It is less clear whether a program-level approach is as useful for
undergraduate liberal arts degrees. For instance, a student receiving
an English degree is generally considering the same range of
occupational options as someone who majors in history or philosophy.
Tracking all these results by program may not be particularly useful,
and could also make it harder to assess outcomes because some programs
have very few students.
What Congress should do: Congress should consider whether it is
feasible to assess results by undergraduate college instead of program,
particularly at liberal arts institutions. This avoids making
distinctions between, for example, history and English, but would still
allow for separating liberal art majors from those pursuing
engineering. Additional data from the Department of Education would
assist in judging the feasibility of this approach as well as the
anticipated effects. This should also consider whether graduate-level
programs need any sort of aggregation too.
Policy Choice #6: What should be the consequences for missing the
repayment rate benchmark?
The consequences attached to failing a repayment test matter too.
Loss of Federal aid eligibility must be one of the options on the
table. But it cannot be the only one. Schools are so dependent on
Federal aid that its removal is seen as a nuclear option that is very
tough to use. Putting all accountability emphasis only on aid loss thus
creates a dynamic where policymakers will be reluctant to use the one
tool at their disposal.
What Congress should do: Consider the roles of other incentives in
shaping an accountability system. That means considering whether there
are performance levels that might only require disclosures of results.
Other results may indicate the need for greater financial protection,
such as a letter of credit or risk sharing.
These incentives and measures also cannot operate in a vacuum.
Congress should consider performance on multiple measures. For
instance, poor performance on several measures might be just as
worrying as abysmal results on a single indicator. Similarly, it should
establish a system of bonuses that reward institutions that demonstrate
the ability to succeed with traditionally underserved populations.
Conclusion
Theoretically, repayment rates are a better measure of student loan
success than default rates. They capture a broader range of outcomes
and represent a higher standard for the protections we want students to
receive. But the repayment rate is also a more complex concept that
raises issues around students' long-term trajectories in terms of
earnings and income.
Unfortunately, our existing data on loan repayment provides an
insufficient base to properly judge the effects of potential tradeoffs
to address these issues around student movement and program
differentiation. The good news, is the Education Department already has
the data needed to understand these tradeoffs better. It just needs to
better leverage its data on repayment. As a result, Congress should
demand greater data and modeling from the Department of Education about
the potential effects of different repayment definitions and formulas
before enacting a particular regime into law.
______
[summary statement of ben miller]
Federal student aid is a deal between taxpayers, students, and
institutions. When students don't keep up their end of the bargain they
face severe consequences. But there's almost no accountability when
colleges break their promises or repeatedly fail to educate their
students.
The results of our current accountability system are grim,
especially for students traditionally underserved by postsecondary
education. We have 1 million borrowers defaulting each year and
particularly bad results for borrowers of color.
The existing cohort default rate is insufficient to fix our
accountability challenges--just 10 schools risked losing Federal aid
last year for high default rates--99.9 percent of defaulters attended
schools that have little to fear from this measure.
Repayment rates are potentially a stronger and more aspirational
accountability measure. They send a message that our loan system should
expect student success, not just avoid the worst possible outcome.
But we still must answer key questions about repayment rates. This
includes what constitutes successful repayment, the benchmark for
schools, whether program-level is the right measure, and some technical
issues around enrolling in multiple schools and income-driven
repayment. The Department of Education has the data to answer these
questions, but they must be released.
Congress must also understand that repayment rates are just one
component of making Federal accountability work. A reauthorization of
the Higher Education Act must establish a Federal accountability system
that aligns the interests of students, schools, and taxpayers.
That starts with using multiple accountability measures and looking
at results by racial, ethnic, and socioeconomic subgroups. It also
means stronger gatekeeping to keep lousy actors out of the aid programs
and ongoing guard rails to keep schools from breaking bad.
Accountability must also not stop with terminating financial aid for
the worst performers. We need incentives to boost performance of
schools with mediocre results. And we must acknowledge the diversity of
our higher education system and create incentives that address
different business models and risks.
Finally, the rest of the higher education system must step up. No
one has kept up their end of the bargain around funding or cost
containment. States, the Federal Government, and accreditors have
played accountability hot potato for too long.
______
The Chairman. Thank you, Mr. Miller. And thanks to each of
you.
We'll now begin a 5-minute round of questions. We'll try to
keep the back and forth to about 5 minutes.
We'll begin with Senator Young.
Senator Young. I thank the Chairman and Ranking Member for
holding this hearing to discuss accountability and taxpayer
risk in our higher education system.
I'll just note as I start here that I have a provision in
the reauthorization of this Higher Education Act that we'll
ultimately consider related to income share agreements, where
philanthropic or private capital is used to fund degree
programs. One would think that whoever puts that money forward
would, of course, have a great incentive to see that that
student completes their course of study. So it's one of many
benefits of the income share agreement approach.
Dr. Cruz, I understand that the City University of New York
is on the forefront of policies focused on helping students
complete their education and not just enroll in a program, and
I commend the university for that. It's voluntarily investing
in this initiative, and we have other schools that are doing it
as well, but you're really a standout in this regard. Because
of your institution's commitment to retention and completion,
graduation rates have significantly improved.
Dr. Cruz, could you share with us what best strategies
you've learned about to keep students in school and to increase
their likelihood of graduating, and also discuss your
assessment of whether these strategies are scalable to other
schools?
Dr. Cruz. Thank you, Senator Young. All of the strategies
are predicated on the good use of data, actionable data that
identifies which students need which supports at what time
during their trajectory. So, for example, understanding that
low-income students at community colleges may not only need
additional financial supports beyond Federal Pell Grants but
also for Metro cards and to be able to purchase their books,
understanding that they may need some more structure as they
proceed through their educational journey, and providing them
cohort-based models where they have blocks of time where they
take their classes, all of their classes in the morning,
afternoon, at night; and also understanding that these students
need intrusive advising and the tools in order to be able to
progress through their studies in a timely fashion.
Those are some of the strategies. More generally, we see
that we also need to take care of other aspects of the
students? lives--counseling services, health care, child care.
We also need to make sure that these students have access to
what we call high-impact practices, which are practices that
have been shown to disproportionately benefit underserved
students--peer mentoring, supplemental instruction,
undergraduate research.
Senator Young. It sounds like you're talking about
personalized services. You really need to get to know the
circumstances, the challenges, the talents and so forth, of the
individual student so that you can draft an individualized, a
personalized approach to dealing with that student's
challenges, kind of back to the basics, right?
Dr. Cruz. That's right, and you have to structure all of
your organizational resources toward that end.
Senator Young. Okay. It takes leadership from the top, so I
commend you for that. Are there particular tools that you think
institutions need or encouragement that they should receive,
perhaps from government, to ensure that they adopt evidence-
based policies and we increase graduation rates on the back end
of such adoption?
Dr. Cruz. Sure. I think that we need some minimum standards
on what is expected for access, for completion, for time to
degree, for loan outcomes. We need some incentive structures
that would provide those who are willing and able to pursue
improvement to do so; and then, of course, we need some
strategies to be able to make sure that those that are not
doing their part do not get access to the same resources that
others do.
Senator Young. Thank you.
Mr. Delisle, thank you for being here, sir. I am aware of
proposals for risk sharing, so-called skin-in-the-game
proposals. Some of my colleagues have put forward different
proposals. But it's not easy to construct a policy proposal to
deal with making sure institutions of higher education have
skin in the game for their students? successful outcomes.
Questions remain regarding nuances and loopholes that could
create perverse incentives or potentially punish certain
institutions for outcomes that are way outside of their
control.
When examining policies or structures of a risk-sharing
model, requiring colleges to pay back a statutory percentage of
unpaid student loans sounds, at least, like a good idea, in
theory, but there could be a variety of complicating factors.
How can we create risk-sharing models that are fair for all
participants?
Mr. Delisle. Well, I think one important thing in thinking
about a risk-sharing model is I think you'd want to pursue this
policy as a replacement for existing accountability policies
and not in addition to. So in terms of fairness, I think one
thing that's fair to institutions is, as Ben Miller mentioned
earlier, we have many of them because some of them fail in some
circumstances, and the approach has been to sort of layer them
on because one is failing. I think you're right, a risk-sharing
approach is a better way to go. It's not going to be perfect,
but I think it should be pursued as a replacement rather than
as an additional accountability measure.
Senator Young. Okay. I'll follow-up with you, perhaps, on
some more specifics. My time is out.
Thank you, Chairman.
The Chairman. Thank you, Senator Young.
Senator Murray has deferred to Senator Casey.
Senator Casey. Mr. Chairman, thank you; and thank you to
the Ranking Member as well. I want to thank her for letting me
jump the line.
I want to thank our witnesses today. A lot of critically
important issues here to cover. I'll try to cover maybe two.
The first thing I wanted to focus on--and I'll start with
Ms. Voight--is the question of tracking outcomes. We can
compare what happens at the elementary and secondary education
level as opposed to the higher education. We know that, for
example, tracking outcomes for individual groups of students,
so-called subgroups, to ensure that schools are responsible for
every child regardless of race or language proficiency or
disability or income. So we've made some progress in that
context at that level, elementary and secondary, and by
progress I mean helping to close the achievement gap. But in
higher education, data on graduation rates by subgroups is
scarce, and that might be an understatement, particularly data
with regard to students with disabilities.
I've introduced legislation called the RISE Act, which is
also sponsored by Senator Cassidy, Senator Hassan, and Senator
Hatch, which would help address the issue by requiring
institutions of higher education to both collect and report
this data to the extent it would not reveal personally
identifiable information. The collection would include data on
graduation rates for students with disabilities, as well as the
number and percentage of students with disabilities accessing
or receiving accommodations.
Here's the question. Is having this type of data important
to closing the achievement gap for students in higher
education?
Ms. Voight. Thank you for that question and for that focus
on the most vulnerable students who are attending higher
education.
Disaggregated data is absolutely essential to closing gaps
and to ensuring that all students have an equal opportunity to
access college and to succeed in college. We've seen that the
graduation rate data, it's limited to first-time, full-time
students, but it is disaggregated by race, ethnicity, and
gender, and what that's done is uncovered many gaps in
completion by race and ethnicity. It's really shone a light on
some of these problems. So it's an example of how better
information, especially when disaggregated by key demographic
characteristics like race, ethnicity, and income status, can
identify problems within the system and then help us to solve
those problems through strategies like Jose has identified.
Absolutely, we need to strive to get better information,
more disaggregated information to answer the very challenges
that you raised. We now have better information on completion
for part-time and transfer students, which is a great thing,
and CS has been able to make those changes. But those part-time
and transfer rates are not disaggregated by student
characteristics like race, ethnicity, or disability status, for
example. So there's a great room for improvement to get better
information in that way.
Senator Casey. Thank you for that. Any other additional
categories that would be important to helping institutions
improve these outcomes?
Ms. Voight. Sure. Race/ethnicity is key, as is
socioeconomic status. Those are the two that are most often
considered in terms of disaggregating data at the Federal
level. Gender is a key disaggregate that is included. More and
more we're looking for information on students who are veterans
as well, and understanding how veterans are faring within our
higher education system, and age is an important demographic
characteristic as we think about serving today's student who
often is not your traditional 18-year-old going right from high
school into college. So that's another characteristic to keep
in mind.
Senator Casey. Thank you very much.
I'm down to a minute. But, Dr. Cruz, I'd ask you as well,
what are the strategies institutions can use to support
students with disabilities?
Dr. Cruz. Institutions need to create the right climate.
They need to provide their faculty and their staff the right
training to understand that it's beyond accommodations and
beyond what the law requires to serve these students well, that
it's about making sure that they have the same types of support
to be successful to complete their degree and get a good-paying
job to pursue further study.
Institutions need to staff their disability offices better.
Unfortunately, across the country we have a situation where
these offices are overworked and rarely get a chance to go
beyond the scheduling of accommodations and assistive devices.
We also need to invest in innovative programs that will
connect our student with disabilities to internships and will
help them get a leg up if they continue to pursue work later on
in life.
Senator Casey. Thank you very much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Casey.
Senator Cassidy.
Senator Cassidy. Thank you all. I enjoyed your testimony,
each of you, and if I had more time I would ask each of you
questions. What I will say now will not be to challenge, will
not be to disagree as much as to challenge and hopefully
advance.
Ms. Voight, first, thanks for the shout-out on the College
Transparency Act. We have 130 different folks endorsing it, and
it's Cassidy, Hatch, Warren and Whitehouse, and we'd welcome
everybody else. Thank you, and we think it's a good place to
start. Going to the student level, everything you just
mentioned would be reported, so just to say that.
Mr. Carnevale, if I have your last name pronounced
correctly--it's a little bit like ``carnival.''
Dr. Carnevale. That's what it means.
Senator Cassidy. That's what it means.
The old Pogo line, 'We've met the enemy, and he is us,?
you're asking for accountability, we are asking for
accountability from academia. I have a New Republic article
which I'm sure pained them to write, that Rick Perry is right,
but they were saying he was right about his proposed higher ed
reforms in Texas. Among, I think, these reforms--and I'm
pulling it up--was asking universities to give prospective
students choosing college more information about class size,
graduation rate, and earnings in the job market after
graduation. That was one of seven, but the blowback from
academia was intense. They quote there the American Academy of
Universities somehow saying that they were going to punish the
universities that complied with this. There are other factors,
but this is one of them.
Are we going to have severe pushback if we do the College
Transparency Act that Ms. Voight spoke of? You're an
academician. What is Georgetown going to say if we talk about
earnings in the job market after graduation?
Dr. Carnevale. Well, we've come to a point in the politics
of this where the higher ed community has finally accepted the
notion that they have to focus on completion. Now, the
completion goal is very self-serving. That is, if you say that
what we're going to do is provide money so that people complete
college by race, gender, et cetera, what you're saying is, if
I'm running a pizza stand, we want you to sell more full pizzas
to people. So what we're saying is we're going to let them--the
real issue is completion for what, and that's where you get
pushback. That is, if you ask higher education to reach beyond
its own interests and think about the students? interests after
they leave, to some extent they're right, they don't have as
much control over that. That's a more complicated outcome.
But what we have so far is agreement, kicking and
screaming, on the part of higher education that they're Okay
with completion because that is a reflexive----
Senator Cassidy. But what about earnings after graduation?
Because Mr. Delisle's testimony says Harvard dropped a program,
graduate study in art and theater. LSU, King Alexander, the
President of LSU, will talk about how the post-graduation looks
pretty good because we put a lot of engineers out there, LSU
does, so it compares favorably. Will the universities be
kicking and screaming to give that information?
Dr. Carnevale. Well, in a sense, we already have it. That
is, the Congress has dropped $780 million on state longitudinal
data systems beginning in the Bush administration, fully funded
in the Obama stimulus package. So in any public institution in
any state in America, because the states did take the money, we
now know because we can hook up wage record data from employers
and transcript data from colleges, we know what happens to
anybody who takes a program in a public institution, whether
they get a job and how much----
Senator Cassidy. But the purpose of our bill is that I
gather that's not readily available to the graduating high
school seniors trying to decide. Is that a fair comment?
Dr. Carnevale. We built these information systems. They're
largely owned by data warlords in different states. In Virginia
you can find out what you can earn whether you get a job, no
matter what you take, no matter where you go, in a public
institution, but the institutions don't tell you that. It's
that simple.
Senator Cassidy. How do we make it better? Is it just
passing the College Transparency Act?
Dr. Carnevale. You make them tell the students.
Senator Cassidy. That sounds like another----
Dr. Carnevale. I don't know why we're keeping secrets from
the students, but we are.
Senator Cassidy. I agree with that.
Mr. Delisle, one more thing. In your testimony you--one of
the big things about all this is privacy, and in your testimony
you spoke of taking Federal income tax data and sometimes
working it backward. I could imagine that would be very scary
to privacy advocates. Any thoughts on that?
Mr. Delisle. Well, I think when you're reporting statistics
about averages, means, percentiles, none of this is actually
reporting information about individual students. I think the
privacy concern--and there are also protections that you can
take. You can suppress any information if the number of
students leaving a particular program is small. So if it's
fewer than 30, maybe you wait until you gather more data before
you put that out.
But in terms of the privacy concerns, again, we're not
talking about releasing individually identifiable micro data.
Everything is sort of rolled up.
Senator Cassidy. Okay. Well, I'm out of time. I yield back.
Thank you.
The Chairman. Thanks, Senator Cassidy.
Senator Murray.
Senator Murray. Thank you.
Dr. Cruz, thank you. Thank you to all of you for your
testimony.
Thank you for emphasizing the need for Federal
accountability systems to really examine outcomes by student's
race and income. Despite the implementation issues we've had by
the Department of Education, I still believe that maintaining a
focus on outcomes for student subgroups was one of the biggest
successes of our bipartisan reauthorization of the Elementary
and Secondary Education Act, and I agree that holding colleges
accountable for achievement gaps is necessary and really long
overdue in higher education.
I wanted to ask you as a college president, can you
describe how, if you had a better accountability system that
put more focus on underrepresented students, it would help
guide your institution's policies and practices to improve
student outcomes?
Dr. Cruz. Sure. I'm fortunate to be at an institution that
takes very seriously its role as an engine of opportunity and
is working hard to look at this data as we speak, with a goal
to double the number of degrees that we produce by the year
2030.
But having that be sort of a mandate through an
accountability system would only strengthen our ability to
ensure that we're focusing on the right issues, and hopefully
that accountability system will come with some incentives that
will then allow us, because we are so focused on this issue, to
get the resources we need to scale up those things that are
really working for our students. We would, of course, hope that
those incentives would also come with protections for other
institutions across the country who may not be doing their part
to move in the same direction.
Senator Murray. Okay, thank you.
Mr. Miller, I really appreciate your overview on how to
improve our accountability system and your thoughts on the
unique risks that are prevalent in the for-profit sector. Can
you elaborate for us what some of those risks are and what
Congress should be doing to address them?
Mr. Miller. Absolutely. Thank you very much. I think it
really boils down to the fact that we've seen that the Federal
financial aid system is constructed so that for-profit colleges
can generate large profits and large sums of money and grow
without having to show a corresponding level of student
outcomes. And what makes that even harder is because the
Federal taxpayer is the one financing most of the cost of these
places, in the wrong hands the business model becomes all about
recruitment, not quality.
I think what we really need here is sort of a combination
of some things that deal with the outcomes side as well as the
business model and financing side. I think that means both
having stronger requirements around loan outcomes and
completion, because one of the things we've seen here is that
there are some places that have decent outcomes for graduates,
but only one out of every five people is graduating.
Then I think the second thing is I think we have to
acknowledge that we need stronger financial accountability
here. We need to make sure that the taxpayer is not the only
one paying for these educations, and we also need to make sure
that there are stronger checks to say that you don't grow
unless you've got the outcomes to show that you really can
sustain the student base you have.
Senator Murray. How should Congress balance changes that
would mitigate those unique risks posed by the for-profits
while extending a broader accountability framework for other
institutions of higher education?
Mr. Miller. Absolutely. I think the first part is we really
need to make sure we're tackling the financial incentives at
the for-profit colleges. That to me means a private market
test, as well as really thinking about growth strategies and
outside ownership, because I think when you have a disconnect
between who is running the school and who owns the school,
that's sometimes where the financial incentives get mixed up.
Then I think we should have a conversation about what are
the outcomes we want from everybody, and I think that gets into
a measure of something with loan success, a measure around
completion, and there has to be a measure around access because
we want to make sure that schools are taking in our students
who are traditionally underserved and looking at that from an
equity standpoint.
Senator Murray. We don't want a disincentive for having----
Mr. Miller. Absolutely. I don't think we want to create an
incentive that has schools wanting to turn away students of
color or low-income students.
Senator Murray. Low-income, right. Okay.
Mr. Delisle, I believe that a more robust Federal
accountability system can help prevent some of the poor student
loan repayment outcomes that you talked about. You recently
wrote in an editorial that a strong incentives-based
accountability system is needed to guard against the lowest-
quality colleges and programs, as well as those that are wildly
overpriced.
What are the three key elements of a strong incentive-based
accountability system that would achieve those goals?
Mr. Delisle. Well, I think one is you need to go beyond
loans. A lot of times this conversation around accountability
is kind of stuck around loans. I understand how it got there,
but what I'm getting at here is there's a lot of grant aid that
goes to these programs, and we're measuring outcomes against
loans. So this is a principle I would put out there.
I think the reason why in the past policymakers have chosen
to measure loans is that they see loans as a proxy for first
price, how much did you pay, so that's how much you borrowed,
and then second is how much are you earning, but that's
actually translated in the loan context through a payment. So
how much did you borrow and how much are you paying down is
really supposed to be measuring how much did you pay and how
much are you earning.
Well, I think if that's what we're after, if that's what
Congress is after, they have the means to measure that more
precisely than through loans, and then I think that becomes an
easy thing to look at in grant aid as well, because there is
almost $30 billion in grant aid being distributed with none of
the accountability measures that apply to loans.
Senator Murray. Okay, and I'm out of time. But, Mr.
Chairman, I do have some testimony from Senator Durbin. He
asked that we put it in the record, and I would ask unanimous
consent to do that.
The Chairman. Thank you, Senator Murray. We'll do that.
[The prepared statement of Senator Durbin follows:]
prepared statement of richard j. durbin
I would like to thank Chairman Alexander and Ranking Member Murray
for holding this hearing to focus on two very important topics that
must be part of the Senate's debate on reauthorizing the Higher
Education Act--accountability and taxpayer risk.
A college education today is an important stepping stone for many
on the path to the American Dream. We know that those with a college
degree earn significantly more on average over the course of their
lifetime than those without a college education.
At the same time, students are spending more than ever before to
obtain a degree. Cumulatively, Americans today hold more than $1.4
trillion in student loan debt while the average student graduates with
more than $30,000 in debt. It also means the Federal Government's
investment in higher education continues to grow. The Department of
Education distributes almost $130 billion per year in Federal aid to
students.
Unfortunately, for too many students these days, the payoff of a
college education isn't being realized. They have to take on more debt
than they can reasonably repay. They struggle to make their high
monthly student loan payments, forcing them to put off buying a house,
starting a family, and saving for retirement. They get no help from
Department of Education-contracted student loan servicers who often do
not provide them with information about alternative repayment options
like income based repayment programs. They are unable to refinance
their Federal student loans at lower interest rates or discharge their
loans in bankruptcy. They find themselves in default with their credit
scores ruined and debt that follows them to the grave.
While this scenario is repeated over and over across our higher
education system, nowhere is the problem more pronounced than with
students who attend for-profit colleges. For-profit colleges only
enroll 9 percent of all post-secondary students, but receive 17 percent
of all Federal student aid and account for 35 percent of all Federal
student loan defaults. These companies lure students with flashy
advertising, often making false claims about their students' job and
salary prospects. They tend to charge much higher tuition than their
public and not-for-profit counterparts, leading students to take on
more debt. Students who graduate from a for-profit college program
often find that employers don't recognize their degrees. They're left
with worthless degrees and more debt than they can ever repay.
Over the last several years, nearly every major for-profit college
has been the subject of multiple state and Federal investigations and
lawsuits related to consumer fraud. Companies like Corinthian Colleges,
Inc., ITT Tech, and Westwood Colleges closed--collapsing under the
weight of their own wrongdoing--and left tens of thousands of students
across the country in the lurch. The companies lured students to attend
with false promises, pocketed billions in Federal student aid, and then
closed--leaving students and taxpayers to pay for the mess they left
behind.
A Higher Education Act reauthorization must address the risk for-
profit colleges pose to students and taxpayers. For too long, weak
accountability and poor oversight of schools and accreditors has made
Congress and the Federal Government complicit in for-profit colleges'
exploitation of students and bilking of taxpayers. That must change.
We can start by reforming the accreditation process. Accrediting
agencies, along with states and the Federal Government, form what is
known as the Triad, which is tasked with oversight of schools.
Accrediting agencies serve two key roles in this Triad--ensuring
schools meet a basic level of academic quality and being the gate
keepers of Federal financial aid.
In practice, accrediting agencies have struggled to fulfill both of
these roles. Too often they have failed to identify bad actors like
Corinthian Colleges and ITT Tech, which were still accredited up to the
moment they declared bankruptcy, and to take strong action when
misconduct was brought to light. At the same time, the Federal
Government, which recognizes accrediting agencies, doesn't have the
tools it needs to ensure that these agencies are holding the schools
they accredit accountable for their students' outcomes.
A recent Government Accountability Office (GAO) report commissioned
by Senator Schatz, Representative DeLauro and myself entitled ``Higher
Education: Expert Views of U.S. Accreditation'' compiled feedback from
accreditation experts to develop recommendations. The report highlights
a number failings in the current accreditation system, including poor
oversight of academic quality and lack of information sharing with the
rest of the Triad and the public. The report also identifies a number
of strategies to improve each of these areas. I urge the Members of
this Committee to review this study to inform your decisions as you
work through this reauthorization.
Senators Elizabeth Warren, Brian Schatz, and I will soon
reintroduce the Accreditation Reform and Enhanced Accountability Act
(AREAA). Among other reforms, the bill eliminates the provision in
current law which forbids the Department of Education from setting and
enforcing student outcomes standards, makes it easier for accreditors
to take action against schools for not meeting standards, improves
conflict of interest protections, increases public transparency around
the accreditation process, and gives the Department additional tools to
ensure accreditors are aggressively overseeing schools.
The best way to prevent students and taxpayers from another
Corinthian or ITT Tech, is to improve oversight of schools on the front
end by accreditors--making it less likely that predatory and poor
performing schools are allowed to participate in Federal student aid
program. But, no matter when misconduct occurs, schools must be
accountable to their students.
But a practice, used almost exclusively in higher education by for-
profit colleges, currently prevents students from holding their schools
accountable for fraud and deception. As part of the enrollment
agreements for-profit college students must sign, companies often bury
mandatory arbitration clauses in the fine print. By agreeing to these
clauses, students forfeit their right to sue the schools either as
individuals or as part of a class. Instead, students are forced to
resolve disputes between themselves and their school in an arbitration
proceeding where the deck is stacked against students. Because, the
outcome of arbitration proceedings are often secret, the practice also
serves to hide misconduct from accreditors and regulators.
It also means that instead of seeking financial relief directly
from their school when misconduct occurs, students are forced to seek
relief from taxpayers. The Higher Education Act allows students who
have been defrauded by their schools to assert a Borrower Defense to
Repayment, which allows them to have their Federal student loans
discharged--ultimately putting taxpayers on the hook for the misconduct
of schools. By allowing students to seek redress directly from schools,
taxpayers could be saved millions of dollars.
I, along with Senators Whitehouse, Warren, Reed, Brown, Blumenthal,
Hirono, Markey, introduced the Court Legal Access and Student Support
(CLASS) Act (S. 553) to end this unfair practice. This legislation
prohibits schools that receive Title IV dollars from interfering with a
student's ability to seek redress through the courts either as
individuals or as part of a group. If it had been illegal for
Corinthian Colleges to use mandatory arbitration, the government may
not be facing the tens of thousands of Borrower Defense claims, worth
tens of millions of dollars, that it is today as a result of
Corinthian's predatory practices.
In order to prevent another Corinthian disaster, we must ensure
that schools can operate without Federal taxpayer support. Too many
for-profit colleges rely too heavily on Federal dollars to keep their
doors open. When the Department of Education delayed Title IV
disbursements to Corinthian by a couple of weeks because of the
company's misconduct, it created a cash-flow crisis for the company
that led to its collapse. No company should be dependent on one source
for its revenue. But current law allows for-profit colleges to receive
up to 90 percent of their revenue from Federal taxpayers. The other 10
percent must come from non-Federal sources like tuition payments,
private donors, etc.
However, a loophole in the law treats Federal education investments
through the Department of Veterans Affairs GI Bill and Department of
Defense Tuition Assistance (TA) program as non-Federal revenue. As a
result, the law incentivizes for-profit educational institutions to
aggressively recruit and target veterans, service members and their
families. By enrolling large numbers of these students, many predatory
for-profit colleges obtain more than 90 percent of their revenue from
Federal taxpayers while still complying with the law.
To better protect students and our taxpayer dollars, I introduced
the Protecting Our Students and Taxpayers (POST) Act, which would
change the definition of what counts as Federal revenue so that it
includes all Federal funds like GI Bill and TA funds and reduces the
amount of Federal revenue from 90 percent to 85 percent.
If we are going to ensure that the investments students and
taxpayers make in higher education pay off, we also need to give
schools a financial stake in the success of their students.
Unfortunately, our existing system requires schools to assume little to
no responsibility for what happens to students after they graduate.
Earlier this year Senators Reed, Murphy, Warren and I reintroduced the
Protect Student Borrower's Act (S. 2028), which would create a
graduated system of penalties for schools with high default rates or
``risk sharing.'' By giving schools ``skin in the game'' when it comes
to their students' success, we give them a financial incentive to do
everything they can to ensure their students are well prepared for good
paying jobs and the future.
I also want to say, that if we are truly interested in
accountability and risk to taxpayers, the Higher Education Act
reauthorization should embrace the Gainful Employment and Borrower
Defense rules finalized under the Obama administration. The Gainful
Employment rule holds career education programs accountable for meeting
their statutory requirement to prepare students for ``gainful
employment.'' Under the rule now in effect, programs that consistently
load students with more debt than they can reasonably repay will lose
Federal student aid dollars. It protects students from incurring high
debt levels for worthless degrees and protects taxpayers from wasting
funds on poor performing programs.
The Borrower Defense rule, finalized by the Obama administration,
set up a more borrower-friendly process for students to submit claims
for relief. But it also included important accountability and taxpayer
protection mechanisms. It established triggers around which schools
would be required to post Letters of Credit to the Department to guard
against taxpayer losses associated with Borrower Defense claims by the
school's students. It also, wisely, cracked down on schools' use of
mandatory arbitration clauses in enrollment agreements--ensuring that
schools could be held directly accountable by students.
Unfortunately, Secretary DeVos has refused to enforce either rule--
for which she is being sued by state attorneys general and others. In
our consideration of a Higher Education Act rewrite, Congress should
reject the DeVos Department of Education's stance on these two
important rules. Instead, we should do our job to legislate important
protections for students and taxpayers included in the Obama rules.
I thank the Ranking Member, Senator Patty Murray, for submitting
this testimony on my behalf and I urge the Committee to take seriously
the need to improve accountability in our higher education system to
better protect students and taxpayers.
______
The Chairman. But let me pick up on your question, because
that's the same question that I've had. We've had a series of
hearings. If we want better accountability, more effective
accountability so that colleges have more responsibility for
helping to make sure students don't borrow more than they can
pay back, what, in addition to the cohort default rate, should
we do? That's basically what Senator Murray was asking, I
think, and you in your testimony, in your written testimony,
said something about it. She asked you for the three most
effective things, and is one of them that we would look at the
rate of repayment of the loans that the students make? Continue
your answer to Senator Murray a little bit.
Mr. Delisle. Sure, I'd be happy to. I think that the loan
repayment is a more comprehensive and more accurate measure of
whether or not students are repaying their loans than default.
As I mentioned in my testimony, the defaults are costly,
they're $4 billion, but income-based repayment, which allows
students to pay down their loans very slowly if their income
relative to their debt is low enough, default rate doesn't
capture that. So you can essentially impose costs on taxpayers
by slowly paying down your loan using income-based repayment,
but you're not in default.
I think a repayment rate, which has traditionally now come
to be defined as is the student paying down principle by some
timeframe, I think that starts to show you the taxpayer
interest in preventing lots of losses under income-based
repayment, but also the interest in protecting the consumer,
who has also essentially probably borrowed or paid too much
relative to what they're actually earning.
The Chairman. What about barriers to colleges that exist
today? Are there Federal barriers that keep colleges from
advising students how much they should borrow? Anyone have an
answer to that? Are there laws/regulations the Federal
Government imposes on campuses?
Mr. Delisle. Well, it's my understanding that they--I'm not
sure they can actually provide financial advice and counseling,
and generally what you hear from financial aid offices is they
tend to feel that they have to offer what the Federal
Government says they can offer in terms of loans. I mean, these
are entitlements. So on the one hand, the school is entitled to
the loan as it's specified in Federal law if they meet the
eligibility criteria.
The Chairman. Ms. Voight, you and Dr. Carnevale were
talking about data. One of the worries I have, I used to look
at the Federal Government from the point of view of a Governor,
and I also saw it when I was education secretary, and basically
what I see is a lot of data already, just all over the place.
And every time a new set of Members of Congress gets elected,
they say we need more data, so we just stack it up on top of
other data. Dr. Carnevale was saying it sounds like we have a
lot of good data, but we're keeping it secret from students.
My question is what would you advise us as we revisit the
Higher Education Act, how do we do two things? One is how do we
keep from piling requests for new data on top of data we're
collecting which isn't as useful? And No. 2, how do we make
sure that whatever we collect that's useful is available to
students without micro-managing 6,000 or 7,000 campuses?
Ms. Voight. That's a great question. You raise an important
point because we really are in a situation where we are data
rich but information poor. We have a lot of data, but it's
unable to be converted into information to help students make
the best decisions.
The Chairman. So would you repeal a lot of laws requiring
data, or what would you do about that?
Ms. Voight. We need to streamline data reporting----
The Chairman. What does that mean?
Ms. Voight ----requirements so that the burden on
institutions is less. Right now, an institution----
The Chairman. Well, who would do that?
Ms. Voight. Well, the College Transparency would do that.
It would streamline reporting for institutions so the burden
would be lower on them. Right now, every institution, to
complete the IPEDS requirements, needs to run code on their
campus to calculate those aggregate metrics. They also have to
report data, sometimes very similar data, to the Office of
Federal Student Aid, as well as their state data system and
their accreditors. So the College Transparency Act would allow
them to report in a more simple way and make it easier for them
to focus on--use their resources on things like----
The Chairman. I'm almost out of time. Let me ask Dr.
Carnevale, you look at a lot of data, what's your answer to
that?
Dr. Carnevale. Well, I'm one-note-Johnny on this, let me
warn you, and that is that if I'm a college student or the
parent of one, I want to know how much it's going to cost, and
when I graduate am I going to get a job and how much am I going
to make and what kind of career am I looking at. And then
either myself or maybe the government can help me, or a
counselor can figure the cost against the return and I can
decide what I want to do.
The rest of it, to me, is research data. That is, we have
plenty of data on subgroups and so on in higher education. As a
political matter, it seems to me it's worth the trade to get
rid of a lot of the data collection we do now and just have
four or five things that we need, instead of adding more and
more and more data into the equation. That's a complicated
bargain to put on a piece of paper.
The Chairman. Thank you very much.
Senator Murphy.
Senator Murphy. Thank you very much, Mr. Chairman. This has
been fascinating and fantastic. I think this is the most
important discussion in the context of higher education
reauthorization, getting the accountability metrics right
because, as has been stated, we are wasting billions of
dollars. We are wasting billions of dollars on educations that
never get completed. We are wasting billions of dollars on
schools that aren't delivering outcomes. And, as we've
discussed here, there are some pretty simple ways to maybe not
get this perfectly right but get it a lot better than we have
today.
I think the reason why you hear a lot of focus on this
question of for-profit colleges is not because we want them to
be held to a different accountability system but because the
development of for-profit colleges, which happened since the
passage of the last higher education reauthorization, has made
accountability more important. When everybody is not-for-
profit, when you are all in the business of delivering an
education rather than trying to achieve the highest return for
your shareholders, accountability isn't as important. It's not
that it isn't important, but when you insert into higher
education a motivation to deliver return for shareholders, then
all of a sudden you see the results we have today where 10
percent of students are going to for-profit schools but 25
percent of all Federal aid is going to for-profit schools and
30 percent of all defaults are happening at for-profit schools.
It begs us to be more concerned about this accountability
question.
I have two questions. Dr. Cruz, I want to ask you this
question in the context of your testimony that any Federal
accountability system has to be tailored to account for
differences in institutional missions, and that really is the
difference between a for-profit and a non-profit. The mission
is different.
How do you tailor an accountability system to account for
those differences in institutional missions between for-profits
and not-for-profits?
Dr. Cruz. I think in the non-profits and the publics we
know what that would look like, which is the discussion we're
having about integrating equity metrics into our systems,
having better data, and ensuring that the campuses have the
right incentives to look at that data and implement the best
practices we all know about in order to better serve their
students.
In the for-profit sector, of course, the incentives are
different, and the accountability structure is as well, not
just from the Federal Government's perspective but also from a
state perspective and an accreditation perspective. So I would
look at the need to better understand what are the incentives
and unintended consequences, or perverse incentives for that
matter, that get in the way of for-profit institutions
investing more of their earnings toward student success rather
than profit. That's the lens we should have when we look at
accountability for them.
Senator Murphy. Mr. Delisle, I wanted to followup on this
fascinating conversation you were having with the Chair and
Ranking Member as they were continuing to press you on
measurements other than student loan rates that you would
recommend going to an accountability system. I'm intrigued by
that notion, but I don't think you ever got to the set of
indicators outside of student loan performance that you would
recommend be part of an accountability measurement. We sort of
shifted from student loan default to student loan repayment,
but we're still on student loans.
You were suggesting that there's more relevant data that
gets more finely to the point of performance and outcomes than
just student loan data, so let me just press you once again on
that, because I think that's a really important conversation.
What else would you recommend we look at in an accountability
system outside of the entire subject of student loans?
Mr. Delisle. Well, first let me say, picking up on this
other conversation here, that I think that if you have a
student-based outcome measure that you were interested in terms
of accountability, you can apply it to different kinds of
institutions with different missions because you just care
about the objective outcome of the students, right? So I don't
think that's preventing you in any way from applying it to
different institutions.
But in terms of other accountability measures, in terms of
the Pell Grant program, you could look at how much do students
earn who get the Pell Grant, even though they don't take out
loans, or perhaps the institution doesn't take out loans at
all. Here again, you probably want to look at earnings, are
students earning more than a minimum wage, on average, or a
certain cut. I think we can debate the details of where the cut
points are, but the Pell Grant program is a big investment.
Some people say, well, we don't need to worry about
accountability for students because they don't have to pay that
back, but they do get a limited amount of Pell Grants, and so
they're using up their limited amount of aid by spending time
at a school that may not be paying off, and they're also
spending an awful lot of time. So I think we owe it to them in
that regard to attach accountability to grants as well as
loans.
Senator Murphy. Thank you, Mr. Chairman.
The Chairman. Thanks, Senator Murphy.
Senator Hassan.
Senator Hassan. Well, thank you very much, Mr. Chairman,
and thank you to all the witnesses for being here today.
Mr. Miller, I wanted to start with a question for you. The
Higher Education Act requires a college to be approved by a
combination of oversight bodies, the state Department of
Education-approved accreditation body and the Federal
Government, to receive Federal financial aid. While this
approach creates a system with checks and balances, it can also
open the door to parts of the triad not fulfilling their role
as intended by the Higher Education Act.
In your testimony you say that states, the Federal
Government, and accreditors have played accountability hot
potato for too long. You mention that this has led to many
states and accrediting agencies to not provide enough
oversight, which allowed predatory for-profits like Corinthian
Colleges and ITT Technical Institute, to take advantage of
students.
Can you explain how in your research states and accrediting
agencies have struggled to hold colleges accountable? In
particular, how do you think states can improve how they work
with the Federal Government and approved accreditors to better
examine student outcomes and ongoing guardrails to fulfill
their role as a key part of the program integrity triad?
Mr. Miller. Absolutely. Very briefly, just to start with
accreditors, one of the things we saw there was that the extent
to which they were really considering outcomes was not as
strong as it could have been, and that often the orientation
was far more toward saying we'll give you another year to
improve rather than saying, you know, at some point there's
enough smoke here, we think there's a fire, and enough is
enough.
On the state side, I think we have a couple of issues. One
is the amount of state capacity for oversight of its schools is
not particularly high. But I think the thing we could at least
start to expect is states being greater overseers of their own
money. So, for example, in California, the Cal Grant program
has its own default rate and graduation rate requirements
attached to it. You could see other states start to do that
with their financial aid money.
The other part is I think states need to make authorization
a more meaningful thing. In some places it's not much more than
a business license and a few hundred dollars, and if that's a
path that's going to end ultimately with Federal aid money and
billions of taxpayer resources, it should be a higher bar than
that.
Senator Hassan. Well, thank you, I appreciate that.
Dr. Carnevale, there's been a lot of conversation during
this reauthorization process about moving from an
accountability system focused on institution-level
accountability to one focused on program-level accountability.
While having access to transparent program-level measures is
valuable, especially for prospective students, we've seen time
and again what happens to student outcomes when institutions
are not held to a high standard.
I have concerns that if we narrow our accountability
metrics to only look at program-level outcomes, we'll let
institutions off the hook. It's the institution's leadership,
the president, senior administrators, and governing board, that
determine what programs are offered and how the college manages
the marketing and recruitment of its students.
What do you think we would lose if we switched from
institution-level accountability to program-level
accountability? Do you think there's a way to use both
approaches to best serve students?
Dr. Carnevale. I think in many cases you want to do both.
You want to do suspenders and a belt in many cases, institution
and program. But if we're ever going to crack the black box of
higher education financing and cost, which is the primary
public issue, I think we're going to have to change the terms
of competition. If we change the terms of competition to the
program level, we'll draw in more providers. We should be
neutral with respect to providers, for-profit or not. We will
then, at the same time, set up a situation where every college
doesn't have to have every program, the cafeteria style. You
can have a college that has one. You set up a whole new
competitive environment when you go to the program level, and
you can then track that, incidentally, once you get to the
program. You can track it to occupations.
The institution, I think, is really an artifact of our
history. I think in many respects it's passe. We're now in an
era in learning where the micro-economics of learning are
really what matter. We'll never crack the code in financing in
higher ed unless we get below the institutional level.
Senator Hassan. I do understand that. I think the concern
is, though, that it is still, within institutions, it is the
institutional leadership that make decisions based on what's
happening with the program, and I think there is some concern
that if you insulate the programs too much in terms of
accountability, or perhaps the way lawyers think about it,
liability, you don't have the institutional leadership really
looking at that level of service and results that we want from
all of our programs. Is that a concern?
Dr. Carnevale. Frankly, I don't think so. I think
institutional leaders--higher education is a business, has a
business model, and the business model we're running now at the
institutional level is incredibly inefficient, in large part
because it doesn't operate at the program level. It's a package
of goods, some consumed, some of investment value.
Incidentally, Georgetown won't go away. That is where I am.
In the end, if you get a Bachelor's degree with 40 percent in a
field of study and 60 percent in general education, we know
over the longer term that has more economic value. So when you
look at the program data, that will show up. So I think
institutional leaders, they have budgets and boards, and in the
end we should drive higher education through those mechanisms.
Senator Hassan. Thank you very much.
And thank you for your indulgence, Mr. Chairman.
The Chairman. Thank you, Senator Hassan.
Senator Smith.
Senator Smith. Thank you very much, Mr. Chairman and
Ranking Member, and to our testifiers today. It was very
interesting.
I'd like to go to something that you said, Mr. Miller. You
said how student aid is a deal between students and taxpayers
and institutions, and that really makes a lot of sense to me. I
think about this in terms of a situation we had in Minnesota in
September 2016. Hennepin County District Court ruled that two
for-profit institutions, Globe University and Minnesota School
of Business, violated laws around consumer fraud and deceptive
trade practices. Then, of course, their licenses were revoked,
and months after that they lost their accreditation and could
no longer receive financial aid dollars.
Here is clearly a situation where the deal didn't work for
students and taxpayers. Of course, these students lost not only
their money, but so much of it is their time.
As we are working to rewrite the Higher Education Act here,
I also understand that the Department of Education is going
through a rulemaking process around this issue of gainful
employment. Could you just talk a little bit about this, how
you see that, and what legislative changes you think we ought
to be making as we look at this whole issue?
Mr. Miller. Absolutely, Senator. One thing I would just
note very briefly is part of what happened with those two
schools you mentioned was a failure of their accreditation
agency to oversee what was happening there properly. The
Department of Education in 2016 rightfully removed that
accreditor's ability to access Federal financial aid. Now this
Department of Education is trying to let them back in later
this year, which I think is concerning.
I think part of it, again, gets back to this issue around
the business model and the recruitment strategies, and that's
where we really see a lot of the problems arise, and that's
where part of it is I think the Department of Education, as
well as states and accreditors, need to be doing a better job
looking at what the marketing materials actually say, what are
the promises made to students, and how are those things
conveyed.
We talk a lot about secret shopping on the servicing side
of loans. We don't really talk about it at all on the actual
education side of things.
I also think we probably need to do a better job getting
money before things go out of business, because what we've seen
is the instant the Department of Education levies a massive
fine, the school will immediately close up shop, leaving
students and taxpayers holding the bag. We should be much more
aggressive in demanding letters of credit from schools up
front, and we should also probably consider whether it's worth
having a Federal tuition recovery fund. Many states have this
in place where basically you can at least get your money back,
but we don't have one at the Federal level. So it becomes
basically who is going to take the loss, the student who has
paid or the taxpayer who has paid, and we should really try to
get the money from the school first.
Senator Smith. Thank you. You said that part of the failure
with Globe and Minnesota School of Business was the failure of
the accreditation agency. So what is the rationale for having
this accreditation agency kind of come back into the fold?
Mr. Miller. I'm really not sure. I think part of it is that
they are trying to claim that they are a new actor and they've
changed their ways, but it's only been about 2 years, which is
not very much time. It takes time to rewrite standards.
It's not just about saying you're going to be a good actor
on paper but walking the walk and talking the talk. I am not
clear that there's really been enough time to show that their
act has really changed and they've gotten better.
Senator Smith. Thank you.
Let me just go back to this question that Senator Hassan
was probing on, which is the relative importance of looking at
program accountability versus institutional accountability. I'd
be very interested to hear what others on the panel think about
this and how we balance these, so really anybody can chime in.
Ms. Voight. Sure. So, especially when thinking about
transparency for students, they need information at the program
level to make decisions. Students are sometimes choosing
between multiple institutions, but sometimes they're only
choosing between programs within an institution. So they need
that information especially on things like workforce outcomes
that are closely tied to the program that a student is enrolled
in.
At the same time, the institutions often are the locus of
control for making policy decisions that impact all programs
across the institution. So there's a role to play, like Dr.
Carnevale said, for both program-and institutional-level data,
transparency and accountability here. Leadership really
matters, and that leadership often is at the institution level.
Senator Smith. Great. Thank you.
Anybody else want to comment on that in just a few seconds?
Mr. Miller. I think there are two other issues at the
program level. One is we need to keep the overall institutional
finances in mind, and the second thing is we know outcomes vary
by graduates of programs. We don't know if they vary by
dropouts. So one of the things you see is, for example, about a
quarter of community college students who do not reduce their
loan balance never declared a program. So where do they fit
within a program accountability structure?
Senator Smith. Great. Thank you very much, Mr. Chair.
The Chairman. Thank you very much.
Senator Warren.
Senator Warren. Mr. Chair, if it's all right with you, I'll
yield to Senator Kaine.
The Chairman. It's all right with me if it's all right with
Senator Kaine.
Senator Kaine. I very much appreciate that, Senator Warren,
and to the Chair and Ranking.
The Chairman. Senator Kaine.
Senator Kaine. Thanks for this great hearing, and thanks
for all of your testimony. My colleagues have asked most of the
questions that I was interested in, but there's one particular
thing I'll focus on, and that is military families and
veterans.
I'm on the Armed Services Committee. I'm the father of a
Marine. With Senator Burr, I'm the chair of the Military Family
Caucus here in the Senate.
There was a letter that was sent to the Ranking and Chair
in both Houses in February from a group of military, military
family, veteran organizations. I'm just going to read the first
two paragraphs of the letter, and then I'll ask that it go into
the record.
``Dear Chairmen and Rankings, on behalf of national
organizations representing our Nation's military
service members, veterans, survivors, and military
families, we write to urge you to ensure that important
laws and regulations protecting students are not
watered down or eliminated. We hope that bipartisan
agreement is possible in order to protect America's
military heroes and their families.''
Next paragraph: ``As you may know, veterans, service
members, survivors and military families are too often
singled out and targeted with the most deceptive and
fraudulent college recruiting. A loophole in the Higher
Education Act's 90/10 rule has the unfortunate effect
of incentivizing proprietary colleges to view veterans,
service members, survivors and military families as
nothing more than dollar signs in uniforms, and to use
aggressive marketing to draw them, as Holly Petraeus,
the former head of the Service Members Affairs at the
U.S. Consumer Financial Protection Bureau, explained.
This is because the U.S. caps the Federal funds
proprietary schools can receive but fails to list funds
from the Departments of Defense and VA, and many
proprietary colleges target DOD and VA funds to offset
the cap on Federal funds. As a result, our Nation's
heroes are targeted with the most deceptive and
aggressive recruiting. Thus, it is critical to fully
uphold the existing protections that help stop these
abuses.''
I'd like to introduce that for the record if I might, Mr.
Chair.
The Chairman. Thank you. It will be.
[The following information can be found on page 75 in
Additional Material:]
Senator Kaine. My question to each of you--and, Ms. Voight,
you talked about veterans as sort of being a group that we're
now paying some attention to as a subgroup, and in an important
way I see this in all my colleges. As we're grappling with the
Higher Education Act, talk a little bit about things like the
90/10 rule and potential reforms to it, or gainful employment.
You were responding to Senator Smith generally about that
topic, what we ought to be sensitive to so that we can protect
the military, military families and veterans from being
targeted with deceptive practices. And I direct that to anyone.
Mr. Miller, you look like you want to jump in.
Mr. Miller. Sure. So, first of all, Senator Kaine, as you
mentioned in that letter, we absolutely have to close the
loophole in the 90/10 rule. We don't want to create a situation
where essentially veterans are multipliers for financial aid.
The second is I think we need to be doing a better job
looking at the actual outcomes achieved of veterans and holding
schools accountable for not serving them well. So right now we
don't have as much reporting on that as we should.
The third thing is we talk a lot about accountability to
help protect them, and we don't talk enough about what do we do
to help a veteran student if they are stuck in a school that is
not using their time well, that is not giving them a good
education. I think part of that is we don't want them to lose
their housing benefits if a school closes right away, and we
also want to make sure that we have plans in place to help them
with credit transfer and to really guide them so they don't
suddenly find themselves stuck having invested large periods of
time with no help.
Senator Kaine. You respond talking about veterans, and this
is more broadly veterans/military families/active duty who
receive a tuition assistance benefit because they're active-
duty status. This affects an awful lot of people, and I see all
of them on my campuses in Virginia.
Are there others who would like to address the topic? Yes,
Dr. Carnevale.
Dr. Carnevale. Myself, my two brothers, my father and my
uncle all went to college on veterans benefits. I never knew--
the check just came, which I think is the problem now, because
there's an issue about how the veterans are using that money. I
remember this all began with the for-profit schools dust-up
over on the House side when I was involved some, and what stuns
me is that we still don't know how veterans use their benefits.
We don't know what majors they're in, what programs they go to,
what the benefit is relative to the--that is, we don't collect
basic gainful employment data on veterans.
Part of that is--because I've been in conversation with the
VA and DOD and others about this--is that they're worried that
it won't be flattering. I think they're wrong. I think it will
be flattering, at least from what I know about veterans and
their tendency to pick fields of study that have an earnings
return. I think the VA will come off very well. But that simple
step of stop just sending the checks and ask somebody to find
out what they're doing with those checks, whether they're in
programs that help, whether they're getting decent counseling--
I don't think they are--that, to me, is the answer here.
The for-profit school thing is, to some extent on this
issue, a bit of a red herring. We don't know how they do in the
other schools, either.
Senator Kaine. Mr. Chair, thank you. I'm going to yield
back to my colleague, and I'm going to ask a similar question
QFR for those who couldn't respond. I'd love your ideas to help
us as we work on HEA.
Thank you, Senator Warren.
The Chairman. Thank you, Senator Kaine.
Senator Warren.
Senator Warren. Thank you, Mr. Chairman.
There seems to be a difference of opinion about whether we
should have an accountability system that treats for-profit
colleges differently from other colleges and universities, so I
just want to jump straight into that discussion.
Mr. Miller, which colleges are driven by the personal
financial interests of private investors rather than
accountability to state taxpayers or volunteer boards of
trustees?
Mr. Miller. For-profit colleges, Senator Warren.
Senator Warren. For-profit colleges. And which colleges
have to demonstrate quarterly profit growth to please Wall
Street shareholders?
Mr. Miller. Those would be publicly traded for-profit
colleges.
Senator Warren. And which colleges usually spend far more
money on marketing and advertising than they spend on actually
teaching anything?
Mr. Miller. Those are also in the for-profit sector.
Senator Warren. And which colleges enroll less than 10
percent of all students but are responsible for nearly 30
percent of all student loan defaults?
Mr. Miller. That's the for-profit college sector.
Senator Warren. And which colleges are more often
investigated or sued by state and Federal authorities for
defrauding students?
Mr. Miller. Those are also for-profit colleges.
Senator Warren. And which colleges are the only schools
that force their students to sign away their legal rights
through arbitration agreements?
Mr. Miller. Those are also in the for-profit sector.
Senator Warren. And which colleges are responsible for 98.6
percent of all fraud claims from defrauded students?
Mr. Miller. For-profit colleges, as well.
Senator Warren. So two of the largest college collapses in
the history of American higher education occurred recently when
Corinthian and ITT imploded, ruining the lives of hundreds of
thousands of students. What kinds of schools were those?
Mr. Miller. They were for-profit colleges, Senator Warren.
Senator Warren. Mr. Miller, are for-profit colleges
different, and should the Federal Government have rules that
acknowledge that difference?
Mr. Miller. I believe they are, Senator Warren. I mean, I
believe we've seen that we have a financial aid system now that
allows for profit without showing high-quality student outcomes
as well, and that the business model in the wrong hands becomes
too much about recruitment and not quality.
Senator Warren. Well, thank you. You know, investors in
for-profit colleges often focus on boosting their profits by
squeezing every possible dime out of students and out of
taxpayers by any means necessary, even if it sometimes means
breaking the law. For-profit colleges are different, and when
the Federal Government pours billions of dollars into these
colleges, we should put some restrictions on the money that
recognize those differences.
History shows us that for-profit colleges need heightened
accountability, but I think there is a much larger problem
here, and that is all colleges pretty much that access the
Federal dollars, no matter the quality of the education that
they provide, and no matter how high tuition rises, and no
matter how hard it is for students to repay their loans, we
have built a system where everyone but the wealthiest students
need a Federal grant or a Federal loan in order to afford
college, and then the Federal Government and the accreditors
put their rubber stamp of approval on these schools, and
students reasonably conclude that those schools will pay off
for them because we have vouched for them.
Mr. Delisle, I know you're concerned about accountability
for the taxpayer, but isn't the best way to protect the
interests of the taxpayer to stop rubber stamping bad schools
and funneling Federal dollars into them in the first place so
that students can get cheated by them?
Mr. Delisle. Well, I mean, I think you're right in terms of
some of the gatekeeping role that accreditors have played and
state authorization. I mean, clearly, it hasn't prevented a lot
of problems and a lot of bad outcomes. I think that--but I also
think that if you have a sort of student outcome in mind that
you think is acceptable and a student outcome in mind that you
think is bad and unacceptable, I think that standard can apply
to institutions regardless of how much money they're getting
and regardless of their tax status or whether or not they have
private investors.
Senator Warren. I'd be fine with that if the schools were
the same. But I think, as the list of questions I went through
with Mr. Miller show, we know where the principal problem is,
and we need to focus on that principal problem. It's hurting a
lot of students.
I think part of what we're talking about here is about
incentives, and I think that most schools are acting rationally
within the terrible system of incentives that we've set up.
Now, I believe that we should have some risk sharing and some
accreditation reform legislation to realign our incentives. We
have made terrible choices in this country, to rely on student
debt as the way that most students have access to higher
education, and it has really thrown our thinking about
accountability out of whack.
Instead of asking whether or not students are leaving
college ready to focus on successful lives that aren't
dominated by monthly debt, we focused almost exclusively in
terms of accountability on whether students literally can pay
the bare minimum to repay their debts to the Federal
Government. I don't see how we can reauthorize this law without
fixing both the college accountability problem and the
structural student loan debt problem that's behind this entire
business.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warren.
Senator Murray, do you have any----
Senator Murray. I don't have any additional questions; I
will submit some for the record. But I just want to thank all
of you for being here. I think this has been a very productive
session. Accountability is obviously important, but it seems to
me a one-size-fits-all for 7,000 different colleges is not one
that's going to work. And as Senator Warren just talked about,
the bad actors, we need to think about that and how we make
sure that we look at how we do accountability in the right way.
But this has been a very productive hearing, and again I
want to thank all of our witnesses. Mr. Chairman, thank you for
holding this hearing.
The Chairman. Well, thank you, Senator Murray. This has
been a good hearing. It's another where we try to have
bipartisan hearings in the sense that we agree on the witnesses
so we get different points of view.
I would encourage each of you, if you have additional
thoughts--remember, we're going to be writing a bill in the
next few weeks, and if you have specific--I mean, I would
invite you to put yourselves in our shoes and say if I were
Senator Alexander or Senator Murray, I'd write it this way. If
you want to send us two, three, four pages, that could be very
helpful to us and to our staff as we work together to do that.
Listening to Senator Warren's comments, I just can't help
but ask Dr. Carnevale, I know Dr. DeGioia at Georgetown
University is a very successful president. Dr. Carnevale, what
if he announced to his board he intended to operate Georgetown
University at a loss for the next 10 years? What do you suppose
would happen?
Dr. Carnevale. I suppose he would--he's one of the longest
tenured presidents, and that would end.
The Chairman. So I gather you think that relying on the
outcome of different universities, different kinds of campuses
is more important than looking at whether they're for-profit or
public or private----
Dr. Carnevale. I think the for-profit schools have
performed--I've been the expert witness who shut down 45 of
them. But I think the for-profit schools have performed an
admirable function in the United States because they're like
the German and the Japanese in the 1970's and ?80's when we
started to fail in manufacturing. That is, they've raised all
these issues. Their behavior resulted in gainful employment on
the table. I agree with them that what's good for the goose is
good for the gander. If we set standards and they don't make
them, then they shouldn't get Title 4 money. But that should
also be true for the rest of the higher education system.
The Chairman. Thank you.
I think Senator Murray's question earlier was the one we're
really trying to focus on today, in addition to cohort default
rate, what you would be looking at, and you've given us some
good answers about that. And in terms of data, which is another
way of accountability, how do we make sure we're getting the
right data without just imposing multitudes of new requirements
for data for researchers that students never see or never use.
I think that's part of our challenge.
The hearing record will remain open for 10 business days.
Members may submit additional information and questions to our
witnesses for the record within that time, if they would like.
The next meeting of the full Committee will be on Tuesday,
February 6th at 10 a.m. on reauthorizing the Higher Education
Act, improving college affordability.
Thank you for being here today.
The Committee will stand adjourned.
ADDITIONAL MATERIAL
February 2, 2017.
Hon. Lamar Alexander,
U.S. Senate Committee on Health, Education, Labor, & Pensions.
Hon.Virginia Foxx,
House Committee on Education & the Workforce,
U.S. House of Representatives.
Hon. Patty Murray,
U.S. Senate Committee on Health, Education, Labor, & Pensions.
Hon. Bobby Scott,
House Committee on Education & the Workforce,
U.S. House of Representatives.
Dear Chairmen Alexander and Foxx, and Ranking Members Murray and
Scott:
On behalf of national organizations representing our Nation's
military servicemembers, veterans, survivors, and military families, we
write to urge you to ensure that important laws and regulations
protecting students are not watered down or eliminated. We hope that
bipartisan agreement is possible in order to protect America's military
heroes and their families.
As you may know, veterans, servicemembers, survivors, and military
family members are too often singled out and targeted with the most
deceptive, fraudulent college recruiting. A loophole in the Higher
Education Act's ``90/10 rule'' has the unfortunate effect of
incentivizing proprietary colleges to view veterans, servicemembers,
survivors, and military families as ``nothing more than dollar signs in
uniform, and to use aggressive marketing to draw them,'' as Holly
Petreaus, the former head of Service Member Affairs at the U.S.
Consumer Financial Protection Bureau, explained. \1\ This is because
the loophole caps the Federal funds proprietary schools can receive,
but fails to list funds from the Departments of Defense (DOD) and
Veterans Affairs (VA), and many proprietary colleges target DOD and VA
funds to offset the cap on Federal funds. As a result, our Nation's
heroes are targeted with the most deceptive and aggressive recruiting.
Thus, it is critical to fully uphold the existing protections that help
stop these abuses.
---------------------------------------------------------------------------
\1\ Hollister K. Petraeus, ``For-Profit Colleges, Vulnerable
G.I.'s'', New York Times (Sept. 21, 2011)
---------------------------------------------------------------------------
We hope you will stand with America's heroes by opposing any
efforts to weaken or eliminate existing protections for student
veterans and their families, including:
The Gainful Employment Rule, which enforces the Higher
Education Act's requirement that career education programs receiving
Federal student aid must ``prepare students for gainful employment in a
recognized occupation.'' This common-sense requirement applies to
career education programs at all types of colleges (public, nonprofit,
and proprietary) and protects both students and taxpayers from waste,
fraud, and abuse. Veterans express anger when they discover that the
government knew that a career education program had a lousy record but
allowed them to waste their time and GI Bill benefits enrolled in it.
The Gainful Employment Rule requires schools to disclose basic
information about program costs and outcomes and prevents funding for
programs that consistently leave students with debts they cannot repay.
Because the rule eliminates funding for wasteful programs, the
Congressional Budget Office estimates that repealing the rule would
increase spending by $1.3 billion over 10 years. \2\
---------------------------------------------------------------------------
\2\ CBO preliminary estimate prohibits the Department of Education
from implementing any rulemaking relating to ``gainful employment'' and
from making any future rules related to ``gainful employment,'' July 7,
2016. Estimate includes both mandatory and discretionary spending.
---------------------------------------------------------------------------
New regulations on Federal student loan relief for
defrauded borrowers and college accountability, which make it harder
for schools to hide fraud and clarify avenues for students to receive
the loan relief they are entitled to under the Higher Education Act.
America's heroes are targeted for such fraud because of the 90/10
loophole, and deserve the relief they are entitled to under the law.
The ban on incentive compensation (sales commissions) in
the Higher Education Act, which was enacted more than 20 years ago with
broad bipartisan support to reduce high-pressure, deceptive sales
tactics. Sales commissions incentivize college recruiters to ``do
anything and say anything'' to get veterans to enroll. Veterans, who
are frequently encouraged to enroll on the spot, are particularly
vulnerable to high-pressure recruiting: over 60 percent are the first
in their family to attend college. In 2015, the Education Department's
Inspector General called for greater oversight and enforcement of the
ban to prevent fraud and abuse. We urge you to oppose the creation of
any loopholes in the ban.
The Enforcement Unit at the Education Department, which
is taking steps to protect all students--but has explicitly embraced a
goal of prioritizing veterans and servicemembers--from any illegal
conduct by any college.
We would be grateful for the opportunity to discuss these concerns
with your staff. Thank you for your time and attention.
Sincerely,
Carl Blake,
Associate Executive Director,
Paralyzed Veterans of America.
Bonnie Carroll,
President and Founder,
Tragedy Assistance Program for Survivors.
Joseph Chenelly,
Executive Director,
AMVETS National Headquarters.
Anthony Hardie,
Director,
Veterans for Common Sense.
Anna Ivey,
Co-Founder,
Service to School.
Mary M. Keller, Ed.D.,
President and Chief Executive Officer,
Military Child Education Coalition.
Peter James Kiernan,
President,
Ivy League Veterans Council.
Michael S. Linnington, LTG (ret), U.S. Army,
Chief Executive Officer,
Wounded Warrior Project.
Jared Lyon,
President & CEO,
Student Veterans of America.
Jeffrey E. Phillips,
Executive Director,
Reserve Officers Association of the United States.
Joyce Raezer,
Executive Director,
National Military Family Association.
Randy Reid, USCG (ret),
Executive Director,
U.S. Coast Guard Chief Petty Officers Association & Enlisted
Association.
Kathy Roth-Douquet,
CEO,
Blue Star Families.
John Rowan,
National President,
Vietnam Veterans of America.
Mark C. Stevenson,
Chief Operating Officer,
Air Force Sergeants Association.
Carrie Wofford,
President,
Veterans Education Success.
______
[Whereupon, at 12 p.m., the hearing was adjourned.]
[all]